KalNorth Gold Mines Limited and Controlled Entities
ACN 100 405 954
Annual Report
For the year ended 30 June 2016
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
CONTENTS
Corporate Particulars
Chairman Statement
Directors’ Report
Financial Report
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Auditors’ Independence Declaration
Independent Auditors’ Report
Corporate Governance Statements
Mineral Resources and Ore Reserves Statement
Mining Tenement Statements
Shareholders Information
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2
3
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57
60
62
KalNorth Gold Mines Limited and Controlled Entities
ed and Controlled Entities For the year ended 30 June 2014
CORPORATE PARTICULARS
For the year ended 30 June 2016
Directors
Mr Jiajun Hu
Mr Lijun Yang
Mr Yuanguang Yang
Chairman
Executive Director
Non-Executive Director
Company
Secretary
Mr Lijun Yang
Registered Office
and Principal
Place of Business
Share Registry
224 Dugan Street
Kalgoorlie, Western Australia 6430
Advanced Share Registry Limited
110 Stirling Highway
Perth WA 6009
Auditor
Solicitor
RSM Australia Partners
8 St Georges Terrace
Perth WA 6000
Steinepreis Paganin
16 Milligan St
Perth WA 6000
Stock Exchange
Listing
Australian Securities Exchange (ASX: KGM)
Company Website www.kalnorthgoldmines.com
1
KalNorth Gold Mines Limited and Controlled Entities
ed and Controlled Entities For the year ended 30 June 2014
For the year ended 30 June 2016
Dear Shareholders,
It is my pleasure to present to you the 2016 Annual Report as Chairman of KalNorth Gold Mines Limited.
The past financial year is another turning point of KalNorth since 2013 when the company suspended the
development of Lindsay’s project.
The Company completed a 1 for 2 Non-Renounceable Rights issue which commenced in September 2015
and an aggregate amount of $895,320 was raised comprising $295,320 from subscription to entitlements
and $600,000 from issue of shortfall shares.
Significant progress was made in improving the Company’s financial conditions with agreement being
reached for settlement of $4.15 million of loans (together with interest accruing on those loans) by issue of
shares. Shareholder approval for the loan to equity settlement was received at the November 2015 AGM,
with completion occurring in late February 2016 on receipt of Foreign Investment Review Board (FIRB)
approval.
The Company entered into a convertible note facility agreement with its then largest shareholder, Cross-
Strait Common Development Fund Co., Limited. At the end of reporting period, an amount of $300,000 had
been drawn against the $2 million facility which had been approved by shareholders at the annual general
meeting in November 2015.
The past financial year saw a further improvement in conditions for Australian gold explorers and producers
with the gold price (in AUD$) improving steadily and capital market conditions following suit. As a result,
there has been renewed interest in the Company’s mineral asset portfolio. The Company disposed of low
grade stockpiles, resulting in welcome revenue enabling the Company to resume limited exploration activity.
A resumption of development at Lindsays, both open pit and underground, is also actively being considered
and progressed by the Board. The Board looks forward to an improvement in the Company’s prospects in
the current financial year.
On behalf of the Board, I thank you, our shareholders, for your continuing support and I also acknowledge
the efforts by executive director, Lijun Yang and his team in difficult conditions.
Jiajun Hu
Chairman
20 October 2016
2
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
The Directors of KalNorth Gold Mines Limited (“the Company”) present their financial report on the
consolidated entity, being the company and its controlled entities, for the financial year ended 30 June
2016.
Directors
The names of directors in office at any time during or since the end of the financial year are listed
hereunder. Directors have been in office since the start of the financial year to the date of this report unless
otherwise stated.
•
•
•
Jiajun Hu
Lijun Yang
Yuanguang Yang
Non-executive Chairman
Executive Director
Non-executive Director
Information on Directors
JIAJUN HU
Non-Executive Chairman
Mr. Jiajun Hu acts as Regional Business Executive of Cross-Strait Common Development Fund Co., Ltd
(hereinafter referred to as “Cross-Strait”). Currently, Cross-Strait, with its global headquarters in Hong
Kong, is the largest shareholder in the Company.
He is responsible for supervising and administrating the investment projects of Cross-Strait in Oceania and
he directly reports to the managing director of Cross-Strait and has gained significant experience in
international investment, financial accounting, commercial contract negotiation and contract dispute
negotiation through corporate transactions in North America, Africa, Asia and Oceania.
He has a Bachelor’s Degree in Business Studies in 2008 from the Australian National University majoring
in finance and accounting. Mr. Hu has specialized knowledge of financial transaction market and
investment capital market, and is familiar with Chinese business and capital market operation. Mr. Hu is
fluent in both English and Chinese
Mr Hu has held no other directorships of other public companies within the last three years.
Interest in shares and options: nil
LIJUN YANG
Executive Director
Mr Yang is a geologist with more than 10 years working experience at various Chinese and Australian gold
operations. He received his Master’s Degree in Exploration Mineralogy from the China University of
Geosciences in 2012 and developed new methodologies to explore for gold mineralisation using the
typomorphic properties of minerals. He commenced working for KalNorth as a Project Evaluation Geologist
in August 2013 and was appointed to the Board in November 2013 as an Executive Director. Mr Yang is
multi-lingual (Chinese & English).
He is a member of the Australian Institute of Geoscientists (“AIG”) and the Society of Economic Geologists
(“SEG”).
Mr Yang has held no other directorships of other public companies within the last three years.
Interest in shares and options: 47,100 ordinary fully paid shares
3
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Information on Directors (Cont’d)
YUANGUANG YANG
Non-Executive Director
Mr. Yang is a Hong Kong CPA (practising) and currently operates a CPA firm in Hong Kong with business
focus in markets of Hong Kong, Mainland China, Australia and New Zealand. Mr. Yang is also a Chartered
Accountant in Australia and New Zealand.
He has over 15 years’ experience in audit and assurance, global tax planning, corporate advisory, family
business and M & A business and also worked with the Industrial and Commercial Bank of China for
several years before running his CPA business.
Mr Yang resides in Hong Kong and is an authorised officer of South Victory Global Limited, a major lender
to and shareholder in the Company.
Mr. Yang has held no other directorships of other public companies within the last three years.
Interest in shares and options: 2,375,300
Company Secretary
Mr Lijun Yang
Principal Activities
The consolidated entity’s principal activity during the year was gold exploration on the Lindsays, Kalpini and
Kurnalpi projects near Kalgoorlie, Western Australia.
Operating Results and Financial Performance
The operating loss after income tax of the consolidated entity for the year ended 30 June 2016 was
$12,330,518 (2015: loss $774,451).
The operating loss for the year was impacted by the following key items:
(i) A fair value loss of $10,355,775 on the debt to equity conversion.
(ii) Exploration expenditure of $1.09 million (2015: $0.79 million) across all project areas and immediately
written-off to the profit and loss.
(iii) Interest expense of $0.31 million (2015: $0.56 million) on the secured and unsecured loans.
(iv) A tax refund of $0.16 million with respect to the 2015 financial year and supported by a tax incentive
submission based upon the R&D activities at the Kurnalpi project and was subsequently received on
the 15th September 2016.
As at 30 June 2016 the company had $34,105 (2015: $238,640) in cash reserves and an aggregate of
$320,054 (2015: $4,764,557) in debt instruments (and accrued interest payable).
At 30 June 2016, the consolidated entity had net assets of $5,569,976 (2015: $1,764,199).
4
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Operating Results and Financial Performance (Continued)
During the Financial Year a number of corporate transactions took place which had a significant effect on
the Company’s state of affairs. These included the following:
• Rights Issue - The Company completed a 1 for 2 Non-Renounceable Rights issue which commenced
in the September 2015 quarter (refer to ASX announcement on 29 July 2015). An aggregate amount of
$895,320 was raised comprising $295,320 from subscription to entitlements and $600,000 from issue
of shortfall shares.
• Convertible Note - A $350,000 convertible note due for redemption in March 2016 was converted to
35 million shares in November 2015.
• Convertible Note Facility – A convertible note facility agreement was entered into with the Company’s
then largest shareholder, Cross-Strait Common Development Fund Co., Limited. At balance date an
amount of $300,000 had been drawn against the $2 million facility. The facility received shareholder
approval at the annual general meeting in November 2015.
• Debt to Equity Conversion - The Company entered into a number of agreements for the settlement of
loans (~$4.5 million) and accrued interest by issue of shares. These transactions were approved by
shareholders in November 2015, loan settlement and completion did not take place until 24 February
2016 on receipt of FIRB approval.
Review of Operations
During the 2016 Financial Year, the Company continued focusing on exploration at Kurnalpi project
and seeking development opportunities at Lindsay’s and Kalpini projects which all three projects
100% owned by the Company and located at less 90 kilometres radius at the centre of Kalgoorlie
town of East Goldfields of West Australia.
Kurnalpi Project (KGM 100%)
In June Quarter of 2015, The Company finalized a geological interpretation using detailed aeromagnetic
and ground gravity survey data and integrated with previous geological mapping which set a solid
foundation for 2016 exploration on Kurnalpi project. The follow up evaluation of those priority targets
defined from achieved geological interpretation in 2016 involved Rotary Air Blast (RAB)-AirCore (AC)-
Reverse Circulation (RC)-Diamond (DC) drilling and a ground-based infill gravity survey.
Schiedam Prospect
In December 2015, A total of 6186m of reconnaissance RAB and AC drilling in 91 holes was completed
over a 2km strike length with east-west lines spaced at approximately 320-400m apart and holes at 80m
centres as the first pass to evaluate the top priority three targets, being “Red Kettle”, “Zandor”, and
“Schiedam” which are identified as a priority exploration target based upon proximity to the Avoca Fault, the
complex structural framework and zone of magnetic destruction- coincident gravity low with the latter two
features suggesting a zone of significant alteration.
52 angled AirCore holes at the Schiedam Prospect has identified an emerging new gold trend that is
supported by results from RC blade drilling completed by a previous explorer in the period 1992-1996.
Assay results have been returned from the entire RAB-AC drill program, with encouraging intersections
(plus 0.30gptAu) returned from 16 holes at Schiedam. Significant intersections include 17m at 1.03gpt Au
in hole KUAC 371 and 8m at 1.43gpt Au in hole KUAC369 with the main intersections defining an
anomalous gold trend over a 1000m strike length.
In June quarter of 2016, the Company completed a second pass (29 holes, 2,039m) of angled air core
drilling at the Schiedam Prospect to follow up the positive gold results returned from an initial drill test in
December 2015. The drill spacing is down to 160m between drill lines and either 40-80m between drill
holes over a strike length of approximately 750m. The drilling intersected a sequence of predominantly
variably altered and weakly deformed ultramafic rocks (komatiite). The most intensely altered zones are
now manifested as a quartz carbonate fuchsite rock.
5
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Review of Operations (Continued)
The gold results were very encouraging which are considered anomalous given the wide spaced pattern of
the drilling to scope out the geochemical footprint of the system. This and the results of the 2015 drill
program have defined a northerly trending basement gold system over a 500m strike length and with a
width of 50-100m wide based on interpretation of the maximum gold value in the drill holes.
The Company is very encouraged by these results that have confirmed and extended an emerging gold
discovery in the Kurnalpi Project. Additional infill drilling of the main Schiedam anomaly and additional gold
anomalies has been planned.
Brilliant North Prospect
At the Brilliant North Prospect which is located approximately 200m to the north of the Brilliant Deposit, two
RC holes for 260m and two diamond holes for 296m were completed on three 40m spaced drill sections to
test for the extension of the altered and mineralised dolerite that hosts the gold resource at Brilliant. The
RC holes evaluated the shallower (surface to 100m vertical) position of the dolerite beneath 35m of
palaeochannel sediments. The two diamond drill tails utilized existing RC holes (2011 era) as pre-collars
and targeted the host dolerite some 140m from surface and some 50m down dip of the shallower RC holes.
The drilling successfully demonstrated the extension of the host altered dolerite a further 120m to the north
and with continuity at depth. The dolerite is approximately 20-25m in true width and is hosted within a
sequence of talc-carbonate altered komatiite. Alteration in the dolerite is restricted to hematite-pyrite-
sericite selvages around narrow stacked west-dipping quartz carbonate veins. The company is encouraged
by the confirmation of the continuity of host altered dolerite at the north end of the Brilliant trend and
supports the Company’s interpretation of a significant alteration trend to the north of Brilliant based upon
results from previous reconnaissance AC drilling and interpretation of detailed ground based gravity data,
which highlights a linear gravity low. The company will continue to progressively evaluate the Brilliant
North alteration system with additional step out deeper drilling.
Project Review and Targeting Exercise
The Company engaged CSA Global Pty Ltd (CSA) to commence a staged project review with the intention
to physically assess the project area in respect to geology, structure, alteration and mineralization in order
to deliver an integrated interpretation that will allow the delivery of constrained targets.
The 1st stage scope includes review of the existing data including surface geochemistry, drilling data,
geophysical data, satellite imagery as well as other data that may be available, the 2nd stage as field
reconnaissance, mapping and sample collection for lithogeochemical analysis and 3rd stage as regional
interpretation and target analysis and exploration model development.
The work program has progressed very well with stage 1 and 2 being completed within 2016 financial year
and the final results anticipated in the September quarter 2016.
Brilliant Resources Update
The Brilliant deposit is part of KalNorth’s Kurnalpi project, located 90 km east-northeast of Kalgoorlie in
Western Australia. The Brilliant Deposit is concentrated in two mineralised corridors: the east and the west
mineralised structures. The east mineralised structure is more consistent with a strike length of
approximately 800 meters, the west mineralised structure has a strike length of approximately 200 meters
as previously defined. Gold mineralisation at Brilliant exists within a brittle dolerite host rock which has
intruded upward into a sequence of Komatiite ultramafic rock units. The gold mineralisation is
predominantly associated with quartz sulphide alteration in the host rock.
The Brilliant deposit Mineral Resource was previously reported at the Kurnalpi project (refer KGM ASX
annual report 2012) under JORC 2004. In late 2012, a further round of RC drilling was completed at the
Brilliant North prospect. In December 2015, a small targeted program of diamond and Reverse Circulating
(RC) drilling was completed to test extensions at the Brilliant North prospect, which extended the western
structures a further 120 meters to the north.
In June quarter 2016, the Company updated the mineral resource estimation of the Brilliant deposit by
adding three of new north western gold mineralised lodes identified at Brilliant North and removing deep
mineralisation due to insufficient grade to support underground mine development as well as unlikely to
support a high stripping ratio for extraction via open pit mining.
6
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Review of Operations (Continued)
The Mineral Resource estimate has been classified as Indicated and Inferred and reported in accordance
with JORC 2012 and comparisons to the previous estimate have been detailed in Mineral Resources and
Ore Reserve Statement of this report.
Prospecting
The company continues to manage several prospectors who operate over much of the Kurnalpi tenement
package. The prospecting activities not only provide a very small income from a share of the nuggets
recovered, but valuable information on the spatial distribution of the nuggets in relation to the regolith and
geology.
A research project had been successfully set up with Geological Survey of West Australia (GSWA) to track
the primary source or sources of the widespread occurrence of the gold nuggets at Kurnalpi.
Lindsay’s Project (100% KGM)
Lindsays is one of three projects which held JORC compliance mineral resources, 100% owned by
KalNorth and located 70 kilometres northeast of Kalgoorlie. The Company developed this project, mainly
the Parrot Feathers deposit, in early 2013 but suspended mining after 6 months as a result of the falling
gold price.
In March quarter 2016, the Company executed a Heads of Agreement (“HOA”) to recommence the
development of Lindsays Mine with Keras Resources plc (“Keras”) (refer to ASX announcement on 14
March 2016). KalNorth has granted Keras an exclusive and irrevocable option to mine presently published
JORC compliant resources at Lindsay’s project. Mining at the Lindsays project may comprise an open pit
mining prospect (Open Pit Mining Proposal) and an underground deposit known as the Parrot Feathers
Deposit (Parrot Feathers Proposal).
On 10 May 2016, the Company announced that Keras had exercised the option and both parties will seek
regulatory mining approvals and finalise the formal agreement. Later Keras lodged the requested
documents for open pit mining to Department of Mines and Petroleum (“DMP”) in Western Australia and
the approval of open pit mining had been received. Both parties are performing final assessment before
any of the mining activities being carried out.
Kalpini Project (100% KGM)
The company’s wholly owned Kalpini project is located some 60km to the north east of Kalgoorlie and
23km east of the Lindsay’s project. The project consists of two tenements once of which is a mining lease
centred on the historical Atlas gold working as well as Camellia and Gambia deposit. The Company
estimated the resource of 4.6Mt @ 1.7g/t Au for 255,600 oz. (refer KGM ASX announcement dated 24
October 2012). The Company is progressing of negotiation with couple of approached parties to realize the
value of the project by development or divestment.
Significant Changes in the State of Affairs
There have not been significant changes in the state of affairs of the consolidated entity during the financial
year, other than as noted in this financial report.
Dividends Paid or Recommended
The Directors do not recommend the payment of a dividend and no dividends have been paid or declared
since the end of the last financial year.
7
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Significant Events after the Reporting Date
Since the end of the financial year and to the date of this report no matter or circumstance has arisen which
has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of
those operations or the state of affairs of the consolidated entity in subsequent financial years other than
the matters referred to below.
(a) On 26 July 2016, the company has drawn down a further $700,000 via the issue of an additional 70
convertible notes (with a face value of $10,000 each) under the facility. There remains a further $1
Million available to draw down under the facility on or before 31 December 2016.
Likely Developments and Expected Results
The company intends to remain focused on adding value through ongoing exploration activities at its main
projects and may seek alliance partners to fast track development of existing resource assets.
Environmental Issues
The consolidated entity is subject to significant environmental regulation in respect of its exploration
activities.
The consolidated entity aims to ensure the appropriate standard of environmental care is achieved and, in
doing so, comply with all environmental legislation. The directors of the consolidated entity are not aware
of any breach of environmental legislation for the year under review.
Meetings of Directors
During the financial year 15 meetings of Directors were held. Attendances by each Director during the year
were as follows:
Lijun Yang
Jiajun Hu
Yuanguang Yang
Directors’ Meetings
Number of meetings
eligible to attend
Number
attended
15
15
15
15
15
15
¹There were no Audit or Remuneration Committee meetings held, with all matters dealt with by the Board
as a whole.
Options
At the date of this report, there were no unissued ordinary shares of KalNorth Gold Mines Limited under
option (2015: Nil).
During the year ended 30 June 2016 and to the date of this report, no shares were issued on the exercise
of options (2015: nil).
Risk Management
The Board is responsible for ensuring that risks and opportunities are identified in a timely manner and that
activities are aligned with the risks and opportunities identified by the Board.
8
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Risk Management (Continued)
The consolidated entity believes that it is crucial for all Board members to be a part of this process and, as
such, the Board has not established a separate risk management committee, but considers these matters
at Board meetings.
The Board has a number of mechanisms in place to ensure that management’s objectives and activities
are aligned with the risks identified by the Board. These include Board approval of a strategic plan which
encompasses strategy statements designed to meet stakeholders needs and manage business risk, and
implementation of Board approved operating plans and budgets and the monitoring thereof.
Remuneration Report (Audited)
This report outlines the remuneration arrangements in place for Directors and executives of the
consolidated entity.
Remuneration Policy
The remuneration policy of KalNorth Gold Mines Limited has been designed to align Director and executive
objectives with shareholder and business objectives by providing a fixed remuneration component and
offering specific long-term incentives based on key performance areas affecting the consolidated entity’s
ability to attract and retain the best Directors and executives to run and manage the consolidated entity.
The Board’s policy for determining the nature and amount of remuneration for Board members and senior
executives of the consolidated entity is as follows:
The remuneration policy setting out the terms and conditions for executive directors and other senior
executives was developed by the Board. All executives receive a base salary (which is based on factors
such as the length of service and experience) and superannuation. The Board reviews executive packages
annually by reference to the consolidated entity’s performance, executive performance, and comparable
information from industry sectors and other listed companies in similar industries.
The Board may exercise discretion in relation to approving incentives, bonuses, and options. The policy is
designed to attract the highest calibre of executives and reward them for performance that results in long-
term growth in shareholder wealth.
All remuneration paid to Directors and executives is valued at the cost to the consolidated entity and
expensed.
Executives are also entitled to participate in the employee share and option arrangements. Shares given to
Directors and executives are valued as the difference between the market price of those shares and the
amount paid by the Director or executive. Options are valued using the Black-Scholes methodology.
Performance-Based Remuneration
The consolidated entity currently has no compulsory performance-based remuneration component built into
Director and executive remuneration packages. However, performance-based bonuses may be awarded
from time to time at the discretion of the Board, and this will be dependent on individual performance linked
to the consolidated entity’s strategic objectives for that period.
In the current year, no bonuses were paid or declared.
Non-Executive Director Remuneration
The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to
attract and retain Directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
9
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Remuneration Report (Audited) (Cont’d)
The Board considers the fees paid to non-executive Directors of comparable companies when undertaking
the annual review process. Independent advice is obtained when considered necessary to confirm that
remuneration is in line with market practice. Each Director may receive a fee for being a Director of the
Company.
Non-executive Directors may also receive performance rights (subject to shareholder approval) as it is
considered an appropriate method of providing sufficient reward whilst maintaining cash reserves.
Relationship between Remuneration Policy and Consolidated Entity Performance
The remuneration policy has been tailored to increase goal congruence between shareholders and
Directors and executives. From time to time, this is facilitated through the issue of options to the majority of
directors and executives to encourage the alignment of personal and shareholder interests. The
consolidated entity believes this policy will be effective in increasing shareholder wealth.
Key management personnel service agreements
Details of the key conditions of service agreements for key management personnel are as follows:
Lijun Yang
Commencement
Date
01/08/2013
Notice Period
Base Salary
1 month
Base Salary
$100,0001
Termination
Payments
Provided
-
¹Entitled to statutory superannuation contributions
There are no other agreements with key management personnel.
Voting and comments made at the company's 2015 Annual General Meeting ('AGM')
At the 2015 AGM, 99% of the votes received supported the adoption of the remuneration report for the year
ended 30 June 2015. The company did not receive any specific feedback at the AGM regarding its
remuneration practices.
10
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Remuneration Report (Cont’d)
Remuneration Details for the Year Ended 30 June 2016
(a)
Key management personnel compensation:
2016
Name
Short-term benefits
Post-employment benefits
Share-based
payment
Salary, fees
and leave
$
Non- Cash
bonus
$
Non-monetary
benefits
$
Super-
annuation
Retirement
benefits
Options
Termination
Total
$
$
$
$
$
Directors
Lijun Yang
Jiajun Hu
Yuanguang Yang
Other key management personnel
Wade Johnson1
Total
85,385
50,000
30,000
148,095
313,480
-
-
-
-
-
-
-
-
-
-
8,111
4,354
-
14,305
26,770
-
-
-
-
-
-
-
-
-
-
-
-
-
93,496
54,354
30,000
23,076
23,076
185,476
363,326
1 Mr Johnson employment agreement was terminated on 14 April 2016.
11
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Remuneration Report (Cont’d)
Remuneration Details for the Year Ended 30 June 2015
(a)
Key management personnel compensation:
2015
Name
Short-term benefits
Post-employment benefits
Share-based
payment
Salary, fees
and leave
$
Non- Cash
bonus
$
Non-monetary
benefits
$
Super-
annuation
Retirement
benefits
Options
Others
Total
$
$
$
$
$
Directors
Lijun Yang
Jiajun Hu
Yuanguang Yang1
Brendan Peter Connell 2
Other key management personnel
Wade Johnson3
Total
80,000
54,166
23,753
-
183,491
341,410
-
-
-
-
-
-
-
-
-
-
-
-
7,600
7,521
-
-
19,967
35,088
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87,600
61,687
23,753
-
26,689
26,689
230,148
403,188
1 Mr. Yuanguang Yang was appointed 28 August 2014.
2 Mr. Connell resigned on 28 August 2014.
3 Mr Johnson received an additional $33,491 in salary in lieu of forgoing a portion of his accrued annual leave entitlements.
12
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Remuneration Report (Cont’d)
Share-based payment compensation
To ensure that the consolidated entity has appropriate mechanisms to continue to attract and retain the
services of Directors and Executives of a high calibre, the consolidated entity has a policy of issuing
options that are exercisable in the future at a certain fixed price.
No options were granted to Directors or key management personnel during the year ended 30 June 2016
(2015: nil).
Key management personnel shareholdings
The number of ordinary shares in KalNorth Gold Mines Limited held by each key management personnel of
the consolidated entity during the financial year is as follows:
2016
Directors
Lijun Yang
Jiajun Hu
Yuanguang Yang
Other
Wade Johnson
Total
Balance
1 July 2015
Granted as
Remuneration
Rights
Entitlement
Allotment
Net Change
Other
Balance
30 June 2016
31,400
-
-
1,010,000
1,041,400
-
-
-
-
-
-
-
-
-
-
15,700
-
2,375,300
47,100
-
2,375,300
(1,010,000)
1,381,000
-
2,422,400
Key management personnel option holdings
No options were granted or held by key management personnel in the current or prior year.
Loans to key management personnel and their related parties
There were no loans outstanding at the reporting date to key management personnel and their related parties.
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Trade and other payable
Use of Remuneration Consultants
The Company did not use any remuneration consultants during the period.
2016
$
34,167
13
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Remuneration Report (Cont’d)
Additional information
The earnings of the consolidated entity for the five years to 30 June 2016 are summarised below:
2016
$
2015
$
2014
$
2013
$
2012
$
Sales revenue
EBITDA
EBIT
Loss after income tax
1,565,081
(11,958,266)
(12,018,044)
(12,330,518)
5,211,564
9,295
(95,773)
3,629,630
(9,818,556) (55,814,673)
(210,686) (10,037,470) (56,364,791)
(774,451) (10,763,483) (56,492,958)
-
(2,410,108)
(2,639,101)
(2,639,507)
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
2016
2015
2014
2013
2012
Share price at financial year end ($)
Total dividends declared (cents per
share)
Basic loss per share (cents per
share)
[END OF REMUNERATION REPORT]
0.023
0.008
0.009
0.065
0.23
-
-
-
-
-
(2.23)
(0.28)
(5.28)
(35.09)
(1.89)
Indemnification and Insurance of Officers and Auditors
The Company’s Constitution requires it to indemnify Directors and officers of any entity within the
consolidated entity against liabilities incurred to third parties and against costs and expenses incurred in
defending civil or criminal proceedings, except in certain circumstances. An indemnity is also provided to
the Company’s auditors under the terms of their engagement. Directors and officers of the consolidated
entity have been insured against all liabilities and expenses arising as a result of work performed in their
respective capacities, to the extent permitted by law. The insurance premium relates to:
•
costs and expenses incurred by the relevant officers in defending proceedings, whether civil or
criminal and whatever the outcome;
• other liabilities that may arise from their position, with the exception of conduct involving a wilful
breach of duty or improper use of information or position to gain a personal advantage.
Proceedings on Behalf of Company
No person has applied for leave of the Court to bring proceedings on behalf of the company or intervene in
any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the
company for all or any part of those proceedings. The company was not a party to any such proceedings
during the year.
Non-Audit Services
The Board of Directors is satisfied that the provision of non-audit services during the year is compatible
with the general standard of independence for auditors imposed by the Corporations Act 2001. The
Directors are satisfied that the services disclosed below did not compromise the external auditor’s
independence for the following reasons:
• all non-audit services are reviewed and approved by the Board prior to commencement to ensure
they do not adversely affect the integrity and objectivity of the auditor; and
•
the nature of the services provided does not compromise the general principles relating to auditor
independence in accordance with APES 110: Code of Ethics for Professional Accountants set by
the Accounting Professional and Ethical Standards Board.
The following fees were paid or payable to RSM Australia Partners for non-audit services:
14
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ REPORT
Taxation services
Other taxation services – R&D return and lodgment assistance
2016
$
5,000
-
5,000
2015
$
9,000
48,659
57,659
Auditor’s Independence Declaration
The auditor, RSM Australia Partners, has provided the Board of Directors with an independence
declaration in accordance with section 307C of the Corporations Act 2001 and included within these
financial statements.
Auditor
RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001.
The Report of Directors, incorporating the Remuneration Report, is signed pursuant to section 298(2) (a) of
the Corporations Act 2001 in accordance with a resolution of the Board of Directors.
Lijun Yang
Executive Director
Dated at Perth this 28 day of September 2016
15
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
For the year ended 30 June 2016
Revenue from gold sales
Revenue from non-mineral sales
Cost of sales – gold sales
Cost of sales – non-mineral sales
Note
2016
$
2015
$
1,444,329
120,752
(1,028,673)
(119,200)
9,295
-
-
-
Gross profit
417,208
9,295
Other income
(Loss)/Gain on sale of tenements
Director and corporate employee costs
Professional fees and consultants
Advertising and promotion cost
Depreciation expenses
Listing and registry fees
Exploration costs
Interest expense
Debt to equity – fair value loss
Other expenses
Loss before income tax
Income tax benefit
Loss after income tax for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Other comprehensive income for the year, net of tax
3
3
8
4
5
161,697
(463,207)
(188,750)
(199,321)
(2,160)
(59,778)
(39,377)
(1,098,112)
(312,474)
(10,355,775)
(190,469)
(12,330,518)
-
(12,330,518)
550,311
913,460
(178,812)
(303,285)
(5,945)
(114,913)
(29,047)
(794,899)
(563,765)
-
(256,851)
(774,451)
-
(774,451)
-
-
-
-
Total comprehensive loss for the year
(12,330,518)
(774,451)
Loss per share
Basic and diluted loss per share (cents)
16
(2.23)
(0.28)
The accompanying notes form an integral part of these financial statements.
16
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2016
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total Current Assets
Non-Current Assets
Property, plant and equipment
Exploration and evaluation expenditure
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Interest bearing liabilities
Total Current Liabilities
Non-Current Liabilities
Restoration provision
Total Non-Current Liabilities
TOTAL LIABILITIES
Note
2016
$
2015
$
18 (b)
6
7
34,105
302,293
7,500
343,898
238,640
15,993
7,500
262,133
8
9
338,190
6,999,901
7,338,091
389,920
7,147,846
7,537,766
7,681,989
7,799,899
10
11
12
288,339
320,054
608,393
122,785
4,764,557
4,887,342
1,503,620
1,503,620
1,148,358
1,148,358
2,112,013
6,035,700
NET ASSETS
5,569,976
1,764,199
EQUITY
Issued capital
Accumulated losses
TOTAL EQUITY
13
92,388,017
(86,818,041)
76,251,722
(74,487,523)
5,569,976
1,764,199
The accompanying notes form an integral part of these financial statements.
17
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
2015
As at 1 July 2014
Loss after income tax for the year
Total comprehensive income for the year, net of tax
Transfer of expired share option costs
Shares issued during the year, net of costs
As at 30 June 2015
2016
As at 1 July 2015
Loss after income tax for the year
Total comprehensive income for the year, net of tax
Shares issued during the year, net of costs
Equity portion on convertible note issued during year
As at 30 June 2016
Issued
Capital
$
Accumulated
Losses
$
Share
payment
reserve
$
Total
Equity
$
75,226,229
(75,047,490)
1,334,418
-
-
-
(774,451)
(774,451)
-
-
1,334,418
(1,334,418)
1,025,493
-
76,251,722
(74,487,523)
76,251,722
(74,487,523)
-
-
(12,330,518)
(12,330,518)
16,109,255
27,040
-
-
92,388,017
(86,818,041)
-
-
-
-
-
-
-
1,513,157
(774,451)
(774,451)
-
-
1,764,199
1,764,199
(12,330,518)
(12,330,518)
16,109,255
27,040
5,569,976
The accompanying notes form an integral part of these financial statements.
18
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Research and development tax refund
Interest received
Interest paid
Other income
Other payments
Refund of office security bond
Net cash used in operating activities
Cash flows from investing activities
Proceeds from sale of tenements
Payments for plant and equipment
Payments for mine tenements
Payment for mineral exploration activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares (net)
Proceeds from short-term borrowings
Proceeds from borrowings – convertible loan
Repayment of borrowings - unsecured
Net cash provided by financing activities
Note
2016
$
1,319,118
(1,632,110)
-
3,785
(56,316)
120,752
(119,200)
-
(363,971)
18(a)
2015
$
25,890
(788,237)
533,785
6,923
(13,325)
-
-
27,050
(207,914)
40,000
(8,048)
-
(1,000,576)
(968,624)
1,800,000
-
(1,000,000)
(782,313)
(32,313)
861,060
17,000
300,000
(50,000)
1,128,060
-
-
350,000
-
350,000
Net increase / (decrease) in cash held
(204,535)
109,773
Cash and cash equivalents at the beginning of the financial year
238,640
128,867
Cash and cash equivalents at the end of the financial year
18(b)
34,105
238,640
The accompanying notes form an integral part of these financial statements.
19
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies
The financial statements cover KalNorth Gold Mines Limited (“KalNorth” “Company”) as a consolidated
entity consisting of KalNorth Gold Mines Limited and the entities it controlled at the end of, or during, the
year. The financial statements are presented in Australian dollars, which is KalNorth's functional and
presentation currency.
The financial report was authorised for issue on 28 September 2016 by the Board of Directors.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the
Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also
comply with International Financial Reporting Standards as issued by the International Accounting
Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where
applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value
through profit or loss, investment properties, certain classes of property, plant and equipment and
derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the consolidated entity's
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are disclosed in note 2.
Going Concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of
normal business activities and the realisation of assets and discharge of liabilities in the normal course of
business.
As disclosed in the financial statements, the consolidated entity incurred a loss of $12,330,518 and had net
cash outflows from operating and investing activities respectively of $363,971 and $968,624, during the
year ended 30 June 2016. As at that date the consolidated entity had net current liabilities of $264,495.
These factors indicate significant uncertainty as to whether the consolidated entity will continue as a going
concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of
business and at the amounts stated in the financial report.
The Directors believe that it is reasonably foreseeable that the consolidated entity will continue as a going
concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report
after consideration of the following mitigating factors:
(a) As disclosed in Notes 4 and 13, the loss for the year includes a non-cash charge to the profit and loss
of $10,355,775 pertaining to a debt to equity fair value loss.
(b) As disclosed in Note 11, the Company has access to a convertible note facility of $2,000,000 which
was drawn down to $300,000 at 30 June 2016. Subsequent to year-end, a further $700,000 was
drawn down under the facility and the Company remains in compliance with the terms and conditions of
the facility in order to be able to draw down up to a further $1,000,000 on or before 31 December 2016
should it need to do so. The convertible notes issued under the facility have a redemption date of 30
April 2017 and, whilst no agreement has been reached with the facility holder, the directors believe that
they may be able to negotiate an extension to the redemption date, should that become necessary.
(c) As previously announced, the Company is also at an advanced stage of negotiations with AIM listed
Keras Resources Inc to recommence mining activities on the Lindsays deposit, which has the potential
to generate cash flows for the Company whilst at the same time not incur any expenditure in this
regard.
20
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
(d) Given the current favourable economic conditions for Australian based gold operations, the Company
continues to review opportunities for sale or development of its Kurnalpi and Kalpini projects. Active
discussions continue with a number of parties in this regard. The Directors also believe that the
Company has the capacity to raise new equity capital as demonstrated in prior periods.
(e) The Company has the capacity to further reduce discretionary expenditure in line with available
funding.
Accordingly, the Directors believe that the consolidated entity will be able to continue as a going concern
and that it is appropriate to adopt the going concern basis in the preparation of the financial report.
The financial report does not include any adjustments relating to the amounts or classification of recorded
assets or liabilities that might be necessary if the consolidated entity does not continue as going concerns.
New, revised or amending Accounting Standards and Interpretations adopted
The Company has adopted all of the new, revised or amending Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting
period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not
been early adopted.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the
consolidated entity only. Supplementary information about the parent entity is disclosed in Note 24.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of KalNorth
Gold Mines Limited ('company' or 'parent entity') as at 30 June 2016 and the results of all subsidiaries for
the year then ended. KalNorth Gold Mines Limited and its subsidiaries together are referred to in these
financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity
controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the consolidated entity. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the
consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in
ownership interest, without the loss of control, is accounted for as an equity transaction, where the
difference between the consideration transferred and the book value of the share of the non-controlling
interest acquired is recognised directly in equity attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of
profit or loss and other comprehensive income, statement of financial position and statement of changes in
equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-
controlling interest in full, even if that results in a deficit balance.
21
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill,
liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences
recognised in equity. The consolidated entity recognises the fair value of the consideration received and
the fair value of any investment retained together with any gain or loss in profit or loss.
Operating Segments
Operating segments are presented using the 'management approach', where the information presented is
on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The
CODM is responsible for the allocation of resources to operating segments and assessing their
performance.
Income tax
The income tax expense (income) for the year comprises current income tax expense (income) and deferred
tax expense (income).
Current income tax expense charged to the profit of loss is the tax payable on taxable income calculated
using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities
(assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation
authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances
during the year as well as unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity instead of profit or
loss when the tax related to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also
result where amounts have been fully expensed but future tax deductions are available. No deferred
income tax will be recognised from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled, based on tax rates enacted or substantially enacted at
reporting date. Their measurement also reflects the manner in which management expects to recover or
settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the
extent that it is probable that future taxable profit will be available against which the benefits of the deferred
tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint
ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the
temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable
future.
Current tax assets and liabilities are offset where a largely enforceable right of set-off exists and it is
intended that net settlement or simultaneous realisation and settlement of the respective asset and liability
will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the
deferred tax assets and liabilities related to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous
realisation and settlement of the respective asset and liability will occur in future periods in which significant
amounts of deferred tax assets or liabilities are expected to be recovered or settled.
22
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
Mining tenements and exploration and evaluation expenditure
Mining tenements are carried at cost, less accumulated impairment losses.
Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable
area of interest. These costs are only carried forward to the extent that they are expected to be recouped
through the successful development of the area or where activities in the area have not yet reached a stage
that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated
costs in relation to an abandoned area are written off in full against profit in the year in which the decision to
abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are amortised over the
life of the area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry
forward costs in relation to that area of interest.
Costs of site restoration are provided over the life of the facility from when exploration commences and are
included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant,
equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of
the mining permits. Such costs have been determined using estimates of future costs, current legal
requirements and technology on an undiscounted basis.
Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of
site restoration, there is uncertainty regarding the nature and extent of the restoration due to community
expectations and future legislation. Accordingly, the costs have been determined on the basis that the
restoration will be completed within one year of abandoning the site.
Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the
asset, but not the legal ownership that are transferred to the economic entity, are classified as finance
leases.
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group
as lessee are classified as operating leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave
expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect
of employees' services up to the reporting date and are measured at the amounts expected to be paid
when the liabilities are settled.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are
incurred.
23
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
Property, plant and equipment
Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any
accumulated depreciation and impairment losses.
Property
Freehold land and buildings are measured on the cost basis less depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not
in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis
of the expected net cash flows that will be received from the assets employment and subsequent disposal.
The expected net cash flows have been discounted to their present values in determining recoverable
amounts.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to
the statement of comprehensive income during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding
freehold land, is depreciated on a straight-line basis over the useful lives to the consolidated entity
commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of fixed asset
Plant and equipment
Buildings
Motor vehicles
IT assets
Depreciation rate
10-33%
10%
25%
33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting
date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These
gains and losses are included in the statement of comprehensive income or loss. When revalued assets
are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained
earnings.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is current when: it is expected to be realised or intended to be sold or consumed in normal
operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve
months after the reporting period; or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets
are classified as non-current.
24
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
Current and non-current classification (cont’d)
A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the
purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least twelve months after the reporting
period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Financial instruments
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity
becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for
financial assets that are delivered within timeframes established by marketplace convention.
Financial instruments are initially measured at fair value plus transactions costs where the instrument is not
classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair
value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified
and measured as set out below.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is
transferred to another party whereby the entity no longer has any significant continuing involvement in the
risks and benefits associated with the asset. Financial liabilities are derecognised where the related
obligations are either discharged, cancelled or expire. The difference between the carrying value of the
financial liability extinguished or transferred to another party and their fair value of consideration paid,
including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
Classification and subsequent measurement
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are subsequently measured at amortised cost using the effective interest rate
method.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated as such or
that are not classified in any of the other categories. They comprise investments in the equity of other entities
where there is neither a fixed maturity nor fixed or determinable payments.
Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised
cost using the effective interest rate method.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective
evidence that a financial asset or group of financial assets is impaired. Objective evidence includes
significant financial difficulty of the issuer or obligor; a breach of contract such as default or delinquency in
payments; the lender granting to a borrower concessions due to economic or legal reasons that the lender
would not otherwise do; it becomes probable that the borrower will enter bankruptcy or other financial
reorganisation; the disappearance of an active market for the financial asset; or observable data indicating
that there is a measurable decrease in estimated future cash flows.
25
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
Impairment of financial assets (cont’d)
The amount of the impairment allowance for financial assets carried at cost is the difference between the
asset's carrying amount and the present value of estimated future cash flows, discounted at the current
market rate of return for similar financial assets.
Available-for-sale financial assets are considered impaired when there has been a significant or prolonged
decline in value below initial cost. Subsequent increments in value are recognised in other comprehensive
income through the available-for-sale reserve.
Fair value
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date; and assumes that
the transaction will take place either: in the principle market; or in the absence of a principal market, in the
most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interest. For non-financial assets, the fair value
measurement is based on its highest and best use. Valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, are used, maximising the
use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. Classifications are reviewed each
reporting date and transfers between levels are determined based on a reassessment of the lowest level
input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal
expertise is either not available or when the valuation is deemed to be significant. External valuers are
selected based on market knowledge and reputation. Where there is a significant change in fair value of an
asset or liability from one period to another, an analysis is undertaken, which includes a verification of the
major inputs applied in the latest valuation and a comparison, where applicable, with external sources of
data.
Impairment of non-financial assets
At each reporting date, the group reviews the carrying values of its tangible and intangible assets to
determine whether there is any indication that those assets have been impaired. If such an indication
exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and
value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its
recoverable amount is expensed to the comprehensive statement of income.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount
of the asset is reduced to its recoverable amount. An impairment loss is recognised in profit or loss
immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated
as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable amount, but only to the extent that the
increased carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is
recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the
reversal of the impairment loss is treated as a revaluation increase.
26
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term
highly liquid investments with original maturities of three months or less, and bank overdrafts.
Trade and Other Receivables
Trade and other receivables include amounts due from customers for goods sold and services performed in
the ordinary course of business. Receivables expected to be collected within 12 months of the end of the
reporting period are classified as current assets. All other receivables are classified as non-current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any provision for impairment.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises all direct materials,
direct labour and an appropriate portion of variable and fixed overheads. Fixed overheads are allocated on
the basis of normal operating capacity. Costs are assigned to inventories using the first-in-first-out basis.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
cost of completion and selling expenses.
Trade and Other Payables
Trade and other payables represent the liabilities for goods and services received by the entity that remain
unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts
normally paid within 30 days of recognition of the liability.
Provision for restoration
Costs of site restoration are recognised in full at present value as a non-current liability and an equivalent
amount capitalised as part of the cost of the asset when an obligation arises to decommission or restore a
site to a certain condition after abandonment as a result of bringing the assets to their present location. The
capitalised cost is amortised over the life of the project and the provision is accredited periodically as the
discounting of the liability unwinds. The unwinding of the discount is recorded as interest expense.
Site restoration costs include the dismantling and removal of mining plant, equipment and building
structures, waste removal and rehabilitation of the site in accordance with clauses of the mining permits.
Such costs are determined using estimates of future costs, current legal requirements and technology on
an undiscounted basis.
Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the
costs of site restoration there is uncertainty regarding the nature and extent of the restoration due to
community expectations and future legislation. Accordingly the costs are determined on the basis that
restoration will be completed within one year of abandoning a site.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method. Where there is
an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of
GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables
and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented
in the cash flow statement on a gross basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.
27
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
Revenue
Sale of gold
Revenue from sale of gold is recognised when the significant risks and rewards of ownership have passed
to the buyer and can be reliably measured. Risks are considered passed to buyer when the customer takes
possession of the ore, however, revenue is not reliably measurable until that ore has been processed.
Therefore revenue from the sale of ore is recognised upon processing.
Interest income
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to
the financial assets.
Share-based payment transactions
The consolidated entity provides benefits to employees (including senior executives) in the form of share-
based payments, whereby employees render services in exchange for shares or rights over shares (equity
settled transactions). The consolidated entity does not provide cash settled share based payments.
The cost of equity settled transactions with employees are measured by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by reference to the
market price of the consolidated entity’s shares on the Australian Stock Exchange. The cost of equity
settled transactions are recognised, together with a corresponding increase in equity, over the period in
which the service conditions are fulfilled, ending on the date on which the relevant employees become fully
entitled to the award (the vesting period).
The cumulative expense recognised for equity settled transactions at each reporting date until vesting date
reflects the extent to which the vesting period has expired, and the consolidated entity’s best estimate of
the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period
represents the movement in cumulative expense recognised for the period.
No cumulative expense is recognised for awards that ultimately do not vest (in respect of non-market
vesting conditions).
Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly
attributable to the issue of new shares or options for the acquisition of a business are not included in the
cost of the acquisition as part of the purchase consideration.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the consolidated
entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
28
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
Finance costs
Finance costs are expensed in the period in which they are incurred.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not
yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended
30 June 2016. The consolidated entity's assessment of the impact of these new or amended Accounting
Standards and Interpretations, most relevant to the consolidated entity, are set out below.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard
provides a single standard for revenue recognition. The core principle of the standard is that an entity will
recognise revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The standard will require: contracts (either written, verbal or implied) to be identified, together with the
separate performance obligations within the contract; determine the transaction price, adjusted for the time
value of money excluding credit risk; allocation of the transaction price to the separate performance
obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and recognition of revenue when each performance obligation
is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For
goods, the performance obligation would be satisfied when the customer obtains control of the goods. For
services, the performance obligation is satisfied when the service has been provided, typically for promises to
transfer services to customers. For performance obligations satisfied over time, an entity would select an
appropriate measure of progress to determine how much revenue should be recognised as the performance
obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial position
as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's
performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to
enable users to understand the contracts with customers; the significant judgments made in applying the
guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a
customer. The consolidated entity will adopt this standard from 1 July 2018 but the impact of its adoption is
yet to be assessed by the consolidated entity.
29
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 1: Statement of Significant Accounting Policies (cont’d)
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard
replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and
finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial
position, measured as the present value of the unavoidable future lease payments to be made over the
lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets
(such as personal computers and small office furniture) where an accounting policy choice exists whereby
either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A
liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments,
lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation
charge for the leased asset (included in operating costs) and an interest expense on the recognised lease
liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the
lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However
EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the
operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For
classification within the statement of cash flows, the lease payments will be separated into both a principal
(financing activities) and interest (either operating or financing activities) component. For lessor
accounting, the standard does not substantially change how a lessor accounts for leases. The
consolidated entity will adopt this standard from 1 July 2019 but the impact of its adoption is yet to be
assessed by the consolidated entity.
Note 2: Critical accounting estimates and judgments
The Directors evaluate estimates and judgments incorporated into the financial report based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of future
events and are based on current trends and economic data, obtained both externally and within the group.
The critical accounting estimates and judgments are:
Restoration provision
A provision has been made for the present value of anticipated costs for future rehabilitation of land
explored or mined. The consolidated entity's mining and exploration activities are subject to various laws
and regulations governing the protection of the environment. The consolidated entity recognises
management's best estimate for assets retirement obligations and site rehabilitations in the period in which
they are incurred. Actual costs incurred in the future periods could differ materially from the estimates.
Additionally, future changes to environmental laws and regulations, life of mine estimates and discount
rates could affect the carrying amount of this provision.
Deferred exploration and evaluation expenditure
Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current.
These costs are carried forward in respect of an area that has not at statement of financial position date
reached a stage that permits reasonable assessment of the existence of economically recoverable reserves,
refer to the accounting policy stated in Note 1.
30
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 3: Other income
Interest received
Refundable R&D tax offset
Profit on sale of property, plant and equipment
Other income
Total other income
2016
$
2015
$
3,785
157,912
-
-
161,697
6,923
533,785
103
9,500
550,311
(Loss)/Gain on sale of tenements (i)
(463,207)
913,460
(i) The Company completed settlement for the sale of its 100% interests in the Roe and Spargoville
projects as part of its divesture of non-core assets (2015: Settlement of the sale of the Mount Jewell
project). All tenements were located within the Goldfields region of Western Australia. The (loss)/gain
on sale consists of the following components;
Proceeds from sale (exclusive of GST)
Deferred purchase consideration - early payment discount (Note 10(i))
Exploration & evaluation expenditure write-back on disposal (Note 9)
Rehabilitation provision write-back on disposal
Total (loss)/gain on sale of tenements
40,000
-
(522,323)
19,116
(463,207)
1,800,000
50,000
(1,000,000)
63,460
913,460
Note 4: Expenses
Loss before income tax consists of the following specific expenses:
2016
$
2015
$
Fair value loss – extinguishment of debt (Note 11, 13(iv))
(10,355,775)
-
Note 5: Income tax
(a)
Income tax recognised
No income tax is payable by the consolidated entity for the year as a loss was recorded for income tax
purposes.
(b) Numerical reconciliation between income tax expense and the loss before income tax
Loss before income tax
Income tax benefit at 28.5% (2015: 30%)
Tax effect of permanent differences – Impairment
Tax effect of permanent differences – debt to equity fair value
expense
Tax effect of temporary differences
Tax effect of deferred tax asset not recognised
Income tax expense
(c)
Unrecognised deferred tax balances
2016
$
2015
$
(12,330,518)
(3,514,198)
45,005
3,106,733
474,972
(112,512)
-
(774,451)
(232,335)
183,816
-
(77,472)
(125,991)
-
Tax losses attributable to members of the tax consolidated group
– revenue
Potential tax benefit at 28.5%
80,156,769
22,844,679
78,063,584
23,419,075
31
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 5: Income tax (cont’d)
A deferred tax asset attributable to income tax losses has not been recognised at reporting date as the
probability criteria disclosed in Note 1 (Income Tax) is not satisfied and such benefit will only be available if
the conditions of deductibility also disclosed in Note 1 (Income Tax) are satisfied.
For the purposes of taxation, KalNorth Gold Mines Limited and its 100% owned Australian subsidiary are a
tax consolidated group. The head entity of the tax consolidated group is KalNorth Gold Mines Limited. The
group has not entered into a tax sharing agreement.
Note 6: Trade and other receivables
Current
Trade receivables – gold stockpile sales (i)
GST receivable
R&D receivable
2016
$
2015
$
137,732
6,649
157,912
302,293
-
15,993
-
15,993
(i) Trade receivables are non-interest bearing and have payment terms between 30 – 90 days.
Note 7: Other assets
Current
Credit card facility - security deposit
Total other assets
2016
$
2015
$
7,500
7,500
7,500
7,500
32
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 8: Property, plant and equipment
Plant and equipment
At cost
Accumulated depreciation
Motor vehicles
At cost
Accumulated depreciation
IT Assets
At cost
Accumulated depreciation
Land and buildings
At cost
Accumulated depreciation
2016
$
2015
$
386,121
(351,975)
34,146
113,887
(113,887)
-
305,072
(302,087)
2,985
380,866
(79,807)
301,059
381,136
(330,897)
50,239
113,887
(102,283)
11,604
302,008
(283,990)
18,018
380,866
(70,807)
310,059
Total written down value
338,190
389,920
(a) Movements in carrying amounts
Land &
Buildings
Plant &
Equipment
Motor
Vehicles
IT
Assets
Total
Balance at 1 July 2014
Depreciation expense
319,059
(9,000)
76,050
(25,811)
30,626
(19,022)
79,098
(61,080)
504,833
(114,913)
Balance at 30 June 2015
310,059
50,239
11,604
18,018
389,920
Additions
Depreciation expense
-
(9,000)
4,985
(21,078)
-
(11,604)
3,063
(18,096)
8,048
(59,778)
Balance at 30 June 2016
301,059
34,146
-
2,985
338,190
Note 9: Exploration and evaluation expenditure
Cost
Reconciliation
Balance at beginning of year
Exploration expenditure incurred
Exploration expenditure immediately expensed (i)
Disposal of tenements (ii)
Additional allowance for rehabilitation
Balance at end of year
2016
$
2015
$
6,999,901
7,147,846
7,147,846
1,098,112
(1,098,112)
(522,323)
374,378
8,035,398
794,899
(794,899)
(1,000,000)
112,448
6,999,901
7,147,846
(i) During the year the company incurred exploration expenditure costs which were immediately expensed as
their recoverability was uncertain.
(ii) The Roe and Spargoville projects were divested during the year (2015: Mt Jewell Project). (Note 3 (i)).
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the
successful development and commercial exploitation or sale of the respective mining areas.
33
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 10: Trade and other payables
Current
Trade payables (i)
Sundry payables and accrued expenses (i)
2016
$
2015
$
188,069
100,270
288,339
67,997
54,788
122,785
(i) There are no amounts included within these balances that are not expected to be settled within the
next 12 months. The average credit terms for services received by the Group are 30 days from invoice
date and are non-interest bearing.
Note 11: Interest bearing liabilities
Current
Secured loans (ii)
Unsecured loans (ii)
Convertible notes (iv)
Convertible notes – Cross Straits (iii)
Interest payable on secured loans (i)(ii)
Interest payable on unsecured loans (i)(ii)
Interest payable on convertible notes (i)(iv)
Interest payable on Cross Straits convertible notes (i)(iii)
Total interest bearing liabilities
(i) The interest payable movement for the year is as follows:
Balance at beginning of year
Interest expense
Interest expense – Present value convertible note
Interest – equity settled on 24 February 2016 (iv)
Interest – equity settled on 26 November 2015 (iv)
Interest – equity settled on 11 March 2015
Interest – equity settled on 2 September 2014
Interest paid for the year
Interest 10% withholding on the convertible note
Balance at end of year
(ii) Secured and unsecured loans
2016
$
2015
$
-
17,000
-
284,577
-
-
-
18,477
3,500,000
700,000
350,000
-
173,562
34,712
6,283
-
320,054
4,764,557
214,557
312,474
(11,617)
(352,511)
(16,156)
-
-
(56,316)
(71,954)
18,477
691,788
563,765
-
-
-
(667,073)
(358,420)
(13,325)
(2,178)
214,557
On 25 November 2015, shareholders approved the issue of shares in settlement of secured and unsecured loans
and accrued interest subject to regulatory approvals.
Regulatory approval was obtained on 23 February 2016 and on 24 February 2016, debts totalling $4,502,510
was settled via the issue of 450,251,000 ordinary fully paid shares as follows;
-
-
415,000,000 ordinary fully paid shares to settle $4,150,000 in loans principal; and
32,251,100 ordinary fully paid shares to settle $352,511 in accrued interest.
On 1 April 2016, the Company repaid the remaining $50,000 in loan principal and $56,316 in accrued
interest.
34
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 11: Interest bearing liabilities (cont’d)
(iii) Convertible notes – Cross Straits
On 15 September 2015, a convertible note facility agreement was entered into with (at the time) the
Company’s largest shareholder, Cross-Strait. Under the terms of the facility, the Company will be able to
draw down up to $2 million. The facility has a maturity date of 30 April 2017.
On 25 November 2015, the facility was approved by shareholders at the Annual General Meeting Cross-
Strait has the right to convert all or part of the amounts drawn down under the facility into shares in the
Company at an issue price of $0.01 per share. On 23 February 2016, regulatory approval was received
and the Company issued 30 convertible notes (with a face value of $10,000 each).
Summary of Cross Straits convertible note is as follows:
Convertible notes – face value
Amount classified as equity (Note 13)
Unwinding of interest
Carrying amount at the end of the year
2016
$
2015
$
300,000
(27,040)
11,617
284,577
-
-
-
-
As at the balance date, the company had $1,700,000 undrawn convertible note facility available. On 26
July 2016, the company has drawn down a further $700,000 via the issue of an additional 70 convertible
notes (with a face value of $10,000 each) under the facility. (note 25 – Subsequent Events).
(iv) Convertible notes
On 20 November 2015, the Company completed the issue of 35,000,000 ordinary fully paid shares on the
conversion of one (1) note (with a face value of $350,000) as approved by shareholders at the Company’s
2014 Annual General Meeting.
On 25 November 2015 the Company completed the issue 1,615,562 ordinary fully paid shares in
settlement of $16,156 in accrued interest up to the date of conversion.
Note 12: Restoration provision
Non-current
Restoration provision (i) (ii)
(i) The provision movement for the year is as follows:
Carrying amount at the start of the year
Sale of tenements
Additional provisions recognised
Carrying amount at the end of the year
2016
$
2015
$
1,503,620
1,148,358
2016
$
2015
$
1,148,358
(19,116)
374,378
1,099,370
(63,460)
112,448
1,503,620
1,148,358
(ii) Costs of site restoration are recognised in full at present value as a non-current liability and an equivalent
amount capitalised as part of the cost of the asset when an obligation arises to decommission or restore a
site to a certain condition after abandonment as a result of bringing the assets to their present location.
35
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 13: Contributed equity
2016
$
2015
$
894,240,060 fully paid ordinary shares (2015: 315,966,034)
92,388,017
76,251,722
Movements in ordinary shares on issue for the year:
Balance 1 July 2015
Placement from an entitlement offer (i)
Placement of shortfall shares from an entitlement offer (i)
Shares issued in settlement of director fees, approved at 2015 Annual
General Meeting (iii)
Shares issued on conversion of convertible note and accrued interest (ii)
Cancellation of shares – previously issued under the employee share
scheme
Shares issued in settlement of secured and unsecured loans and
accrued interest (iv)
Equity portion on convertible note issued during year (v)
Share issue costs for the period
Balance 30 June 2016
No. of
shares
Paid up
capital
$
315,966,034
76,251,722
29,532,064
60,000,000
2,375,300
36,615,562
295,320
600,000
23,753
366,156
(500,000)
-
450,251,100
-
-
14,858,287
27,040
(34,261)
894,240,060
92,388,017
(i)
On 19 October 2015, the company issued 29,532,064 ordinary fully paid shares (at an issue price of
1.00 cent each) on completion of its 1 for entitlement offer and on 25 November 2016 completed a
placement of 60,000,000 ordinary fully paid shares (representing part of the shortfall shares
available from the entitlement offer).
(ii) On 20 November 2015, the company issued 35,000,000 ordinary fully paid shares on the
conversion of one (1) note (with a face value of $350,000) as approved by shareholders at the
Company’s 2014 Annual General Meeting, and on 25 November 2015, a further issue of 1,615,562
ordinary fully paid shares in settlement of accrued interest up to the date of conversion, and as
completed the issue 1,615,562 ordinary fully paid shares in settlement of $16,156 in accrued
interest up to the date of conversion.
(iii) On 25 November 2015, the company issued 2,375,300 ordinary fully paid shares in lieu of director
fees, as approved by shareholders at the Company's 2015 Annual General Meeting.
(iv) On 24 February 2016, after receiving shareholder approval (25 November 2016 - 2015 Annual
General Meeting) and regulatory approval (23 February 2016), the Company issued 450,251,100
ordinary fully paid shares in settlement of $4.15M in loans principal and $352,511 in accrued
interest.
The cost of equity was recorded at fair value, and using the closing share price of 3.3 cents as at 23
February 2016. Accordingly, the company recognised $14,858,287 as the fair value of equity to
settle the principal and accrued interest of $4,502,510 with the difference between the carrying
amount of the financial liability extinguished, and the consideration paid being $10,355,775
recognised as a loss.
It should be noted that at the time of obtaining shareholder approval the closing share price was 1.2
cents, and in the intervening period from obtaining shareholder to regulatory approval, 1.585 million
shares traded in a range of 0.9 cents and 3.3 cents.
(v)
This balance represents the equity component of convertible notes (Note 11 (iii)) issued by the
Company on 24 February 2016.
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the
consolidated entity, to participate in the proceeds from the sale of all surplus assets in proportion to the
number of and amounts paid up on shares held.
36
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 13: Contributed Equity (cont’d)
On a show of hands every member present at a meeting in person or by proxy shall have one vote and
upon a poll each share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a
going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to
maintain an optimum capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce
debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or
company was seen as value adding relative to the current company's share price at the time of the
investment. The consolidated entity is not actively pursuing additional investments in the short term as it
continues to integrate and grow its existing businesses in order to maximise synergies.
The consolidated entity is subject to certain financing arrangements covenants and meeting these is
given priority in all capital risk management decisions. There have been no events of default on the
financing arrangements during the financial year.
Note 14: Key management personnel compensation
Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid to
each member of the consolidated entity’s key management personnel for the year ended 30 June 2016.
The totals of remuneration paid to key management personnel of the consolidated entity during the year are
as follows:
Short-term employee benefits
Termination benefits
Post-employment benefits
Note 15: Related party transactions
2016
$
2015
$
313,480
23,076
26,770
363,326
368,100
-
35,088
403,188
All transactions were made on normal commercial terms and conditions and at market rates.
Transactions:
During the financial year, other than remuneration paid or payable to key management personnel, the
Company had no other related party transactions (2015: no related party transactions).
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Trade and other payable
Loans to/from related parties
2016
$
34,167
2015
$
-
There were no loans to or from related parties at the current and previous reporting date.
37
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 16: Loss per share
a) Basic loss per share
Loss after income tax
2016
$
2015
$
(12,330,518)
(774,451)
Weighted average number of ordinary shares on issue during the year
used as the denominator in calculating basic loss per share
551,825,166
281,026,497
Diluted loss per share is the same as basic loss per share as there are no securities to be classified as
dilutive potential ordinary shares on issue.
Note 17: Auditor’s remuneration
Remuneration of the auditor for:
- audit and review of financial reports- RSM Australia Partners
- taxation services – RSM Australia Pty Ltd
- other taxation services – R&D tax credit assistance- RSM Australia Pty
Ltd
Note 18: Cash flow information
a) Reconciliation of the net loss after income tax to the net cash flows
from operating activities:
Net loss for the year
Non-cash items included in net loss:
Depreciation expense
Exploration expenses
Loss/(gain) on sale of tenements
Debt to equity – fair value loss
Share based settled expenses
Share based settled interest expense
Changes in assets and liabilities:
Decrease in trade and other receivables
Decrease in other assets
Decrease in trade and other creditors
2016
$
2015
$
35,000
5,000
-
40,000
33,800
9,000
48,659
91,459
2016
$
2015
$
(12,330,518)
(774,451)
59,778
1,098,112
463,207
10,355,775
23,753
256,158
(286,300)
-
(3,936)
114,913
794,899
(913,460)
-
-
548,261
16,509
27,050
(21,636)
Net cash outflow from operating activities
(363,971)
(207,915)
b) Reconciliation of cash
Cash balance comprises:
- Cash at bank and on hand
c) Non-Cash Financing and Investing Activities
34,105
238,640
As disclosed in Note 13, the Company issued 486,866,662 ordinary fully paid shares during the year
to settle aggregate outstanding loan principal and accrued interest expenses of $4,868,667.
In prior year, the Company issued 77,019,338 shares during the year to settle outstanding interest
expense of $1,025,493.
38
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 19: Commitments
(i) Mining tenements
The consolidated entity has certain commitments to meet minimum expenditure requirements on the
mineral exploration assets in which it has an interest. The current annual minimum lease expenditure
commitments on these tenements which covers the Lindsays, Kurnalpi and Kalpini projects is
$771,720 (2015: $791,520).
If the consolidated entity decides to relinquish certain leases and/or does not meet these obligations,
assets recognised in the balance sheet may require review to determine the appropriateness of
carrying values. The sale, transfer, or farm-out of exploration rights to third parties will reduce or
extinguish these obligations.
(b) Non-cancellable operating lease commitments
- Not later than 12 months
- Between 12 months and 5 years
- Greater than 5 years
2016
$
2015
$
-
-
-
-
8,004
-
-
8,004
In 2015, the consolidated entity had an operating lease for a hand held data analyser at a rental of $1,334 per
month, which expired on 31 December 2015.
Note 20: Controlled entities
Country of
Incorporation
Percentage Owned (%)
Subsidiaries of KalNorth Gold Mines Limited:
Shannon Resources Pty Ltd (dormant)
Lusitan Prospecting Pty Ltd (dormant)
Australia
Australia
2016
100
100
2015
100
100
Shannon Resources Pty Ltd and Lusitan Prospecting Pty Limited are the registered owners of various
tenements. The parent entity owns 100% of both entities. There was no income earned and no expenses
incurred by these entities for the year end 30 June 2016 (2015: nil).
39
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 21: Segment information
Identification of reportable operating segments
The consolidated entity is organised into two operating segments: mine development and mineral
exploration, both within Australia. During the year ended 30 June 2016, the consolidated entity's external
revenue was derived solely from the sale of certain gold stockpiles and/or its share of prospector gold.
30 June 2016
Revenue
Mine
development
Mineral
Exploration
$
$
Admin
$
Total
consolidated
group
$
Sales to external customers
Other revenue
Total revenue
1,444,329
-
1,444,329
-
-
-
-
120,752
120,752
1,444,329
120,751
1,565,080
EBITDA
415,656
(1,098,112)
(618,524)
(1,300,980)
Interest revenue
Refundable R&D tax offset
Depreciation and amortisation
Loss on sale of tenements
Debt to equity – fair value loss
Finance costs
-
-
-
-
-
-
-
157,912
(11,604)
(463,207)
-
-
3,785
-
(48,174)
-
(10,355,775)
(312,475)
3,785
157,912
(59,778)
(463,207)
(10,355,775)
(312,475)
Loss before income tax
415,656
(1,415,011)
(11,331,163)
(12,330,518)
Income tax benefit
-
-
-
-
Loss after income tax
415,656
(1,415,011)
(11,331,163)
(12,330,518)
30 June 2016
Assets
Segment assets
Exploration assets
Property, plant and equipment
Unallocated assets:
Cash and cash equivalents
Other current assets
Total assets
Liabilities
Segment liabilities
Trade and other payables
Restoration provision
Unallocated liabilities:
Interest-bearing liabilities
Total liabilities
-
-
-
-
-
6,999,901
-
-
338,190
6,999,901
338,190
-
-
34,104
34,104
309,794
309,794
6,999,901
682,088
7,681,989
-
(1,143,530)
-
(360,090)
(288,339)
-
(288,339)
(1,503,620)
-
(1,143,530)
-
(360,090)
(320,054)
(608,393)
(320,054)
(2,112,013)
40
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 21: Segment information (cont’d)
30 June 2015
Revenue
Sales to external customers
Other revenue
Total revenue
EBITDA
Depreciation and amortisation
Impairment expense
Interest revenue
Finance costs
Loss before income tax
Income tax benefit
Loss after income tax
30 June 2015
Assets
Segment assets
Exploration assets
Property, plant and equipment
Unallocated assets:
Cash and cash equivalents
Other current assets
Total assets
Liabilities
Segment liabilities
Trade and other payables
Restoration provision
Unallocated liabilities:
Interest-bearing liabilities
Total liabilities
Mine
development
Mineral
Exploration
$
$
Admin
$
Total
consolidated
group
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,265
1,456,848
1,466,113
9,265
1,456,848
1,466,113
(102,696)
(102,696)
(19,021)
-
-
-
(95,892)
-
6,923
(563,765)
(114,913)
-
6,923
(563,765)
(19,021)
(755,430)
(774,451)
-
-
-
(19,021)
(755,430)
(774,451)
7,147,846
11,603
-
378,317
7,147,846
389,920
-
-
238,640
238,640
23,493
23,493
7,159,449
640,450
7,799,899
-
(1,083,622)
-
(64,736)
(122,785)
-
(122,785)
(1,148,358)
-
(1,083,622)
-
(64,736)
(4,764,557)
(4,887,342)
(4,764,557)
(6,035,700)
41
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 22: Financial risk management objectives and policies
The Consolidated entity’s principal financial instruments comprise cash and short-term deposits.
The main purpose of these financial instruments is to finance the consolidated entity’s operations. The
Consolidated entity has various other financial assets and liabilities such as receivables and payables, which
arise directly from its operations.
The main risks arising from the consolidated entity’s financial instruments are interest rate risks, commodity
price risks, and, indirectly, foreign exchange risk. Other minor risks have been summarised below. The Board
reviews and agrees on policies for managing each of these risks.
(a)
Interest rate risk
The Consolidated entity’s exposure to market interest rate relates primarily to the consolidated entity’s cash
and short-term deposits. All other financial assets in the form of receivables and payables are non-interest
bearing. The Consolidated entity does not engage in any hedging or derivative transactions to manage
interest rate risk.
The following tables set out the carrying amount by maturity of the consolidated entity’s exposure to interest
rate risk and the effective weighted interest rate for each class of these financial instruments
Weighted
average
interest
Rate
%
Floating interest
rate
$
Fixed interest
maturing 1 year or
less
$
Fixed interest
maturing 1 to 5
years
$
30 June 2016
Cash at bank
Total assets
1.14%
34,105
-
Interest bearing liabilities
Total liabilities
8%
-
-
(300,000)
(300,000)
-
-
-
Weighted
average
interest
Rate
%
Floating interest
rate
$
Fixed interest
maturing 1 year or
less
$
Fixed interest
maturing 1 to 5
years
$
30 June 2015
Cash at bank
Total assets
1.97%
238,640
-
Interest bearing liabilities
Interest bearing liabilities
Interest bearing liabilities
Total liabilities
10%
10%
8%
-
-
-
-
(734,712)
(3,673,563)
(356,282)
(4,764,557)
-
-
-
-
-
Interest rate sensitivity analysis – cash at bank
At 30 June 2016, if interest rates had changed by 1% during the entire year with all other variables held
constant, profit for the year and equity would have been $3,332 higher/lower (2015: $3,507), mainly as a
result of higher/lower interest income from cash and cash equivalents.
(b) Credit risk
The maximum exposure to credit risk at reporting date on financial assets of the consolidated entity is the
carrying amount, net of any provisions for doubtful debts, as disclosed in the statement of financial position
and notes to the financial statements.
42
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 22: Financial risk management objectives and policies (cont’d)
(c)
Liquidity risk
The consolidated entity manages liquidity risk by monitoring forecast cash flows and ensuring that
adequate unutilised borrowing facilities are maintained.
The table below analyses the entity’s financial liabilities into relevant maturity groupings based on the
remaining period from the statement of financial position date to the contractual maturity date. As the
amounts disclosed in the table are the contractual undiscounted cash flows, these balances will not
necessarily agree with the amounts disclosed in the statement of financial position.
Less than 6
months
$
6 months
to 1 year
$
1 to 5 years
$
Total
$
(288,339)
-
-
(320,054)
(288,339)
(320,054)
34,105
302,293
336,398
-
7,500
7,500
48,059
(312,554)
-
-
-
-
-
-
-
(288,339)
(320,054)
(608,393)
34,105
309,793
343,898
(264,495)
Less than 6
months
$
6 months
to 1 year
$
1 to 5 years
$
Total
$
(122,785)
-
(4,764,557)
(122,785)
(4,764,557)
238,640
15,993
254,633
-
7,500
7,500
131,848
(4,757,057)
-
-
-
-
-
-
-
(122,785)
(4,764,557)
(4,887,342)
238,640
23,493
262,133
(4,625,209)
30 June 2016
Financial liabilities due
for payment
Trade and other payables
Interest bearing liabilities
Financial assets – cash
flows realisable
Cash assets
Trade and other receivables
Net (outflow)/inflow from
financial instruments
30 June 2015
Financial liabilities due
for payment
Trade and other payables
Interest bearing liabilities
Financial assets – cash
flows realisable
Cash assets
Trade and other receivables
Net (outflow)/inflow from
financial instruments
(d)
Foreign exchange risk
The Consolidated entity sold its ore in Australian Dollars (AUD) and costs of production are denominated in
Australian Dollars (AUD). However, the AUD gold price is set with reference to the USD price. A rapidly
weakening US dollar exposes the consolidated entity to the downside risks related to movement in the
AUD/USD exchange rate. The Consolidated entity’s current policy is for the all of gold production to be
exposed to foreign exchange risk. As production ceased during the prior year and all gold inventories were
sold, there is no current intention to enter into any currency hedging contracts and none are outstanding at
year end. There were no financial instruments with a foreign currency exposure at the reporting date or at
the end of the preceding financial year.
43
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Note 22: Financial risk management objectives and policies (cont’d)
(e) Net fair value of financial assets and liabilities
The carrying amounts of financial instruments included in the statement of financial position approximate their
fair values due to their short terms of maturity.
Note 23: Contingent liabilities and contingent assets
There are no contingent liabilities or assets at reporting date.
Note 24: Parent Information
As referred to in Note 20, the consolidated entity comprises KalNorth Gold Mines Limited, the parent entity
and two wholly-owned subsidiaries. The Parent entity disclosures are not materially different to the
consolidated entity’s disclosures in the Statement of Financial Position and the Statement of Profit or Loss
and Other Comprehensive Income. In addition, there are:
a) no guarantees entered into by the parent entity in relation to the debts of its subsidiaries.
b) no contingent liabilities of the parent entity as at the reporting date.
c) no contractual commitments by the parent entity for the acquisition of property, plant and
equipment as at the reporting date.
Note 25: Events subsequent to reporting date
Since the reporting date and to the date of this report no matter or circumstance has arisen which has
significantly affected, or may significantly affect, the operations of the consolidated entity, the results of
those operations or the state of affairs of the consolidated entity in subsequent financial years other than
the matters referred to below.
(b) On 26 July 2016, the company has drawn down a further $700,000 via the issue of an additional 70
convertible notes (with a face value of $10,000 each) under the facility. There remains a further $1
Million available to draw down under the facility on or before 31 December 2016.
44
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
DIRECTORS’ DECLARATION
The directors of the company declare that, in the opinion of the directors:
(a)
the attached financial statements and notes thereto are in accordance with the Corporations Act
2001, including
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and
its performance for the year ended on that date; and
complying with Australian Accounting Standards, including the Interpretations, and the
Corporations Regulations 2001;
(ii)
(b)
(c)
(d)
the financial statements and notes thereto also comply with International Financial Reporting
Standards, as disclosed in Note 1; and
the directors have been given the declarations required by s295A of the Corporations Act 2001
there are reasonable grounds to believe that the company will be able to pay its debts as and when
they become due and payable;
Signed in accordance with a resolution of the directors made pursuant to s295(5) of the Corporations
Act 2001.
On behalf of the Directors:
Lijun Yang
Executive Director
Dated at Perth this 28 September 2016
45
RSM Australia Partners
8 St Georges Terrace Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 (0) 8 9261 9100
F +61 (0) 8 9261 9111
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of KalNorth Gold Mines Limited for the year ended 30 June
2016, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 28 September 2016
ALASDAIR WHYTE
Partner
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent
accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
RSM Australia Partners
8 St Georges Terrace Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 (0) 8 9261 9100
F +61 (0) 8 9261 9111
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
KALNORTH GOLD MINES LIMITED
Report on the Financial Report
We have audited the accompanying financial report of KalNorth Gold Mines Limited, which comprises the
statement of financial position as at 30 June 2016, statement of comprehensive income, statement of changes in
equity and statement of cash flows for the year then ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the
company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that is free from
material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor's judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the
financial report in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent
accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We
confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of KalNorth Gold Mines Limited, would be in the same terms if given to the directors as at the time of
this auditor's report.
Opinion
In our opinion:
(a) the financial report of KalNorth Gold Mines Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1 in the financial report, which indicates that the
consolidated entity incurred a loss of $12,330,518 and had net cash outflows from operating and investing
activities respectively of $363,971 and $968,624, during the year ended 30 June 2016. As at that date the
consolidated entity had net current liabilities of $264,495.
These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty
which may cast significant doubt about the consolidated entity’s ability to continue as a going concern and
therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal
course of business.
Report on the Remuneration Report
We have audited the Remuneration Report contained within the directors’ report for the year ended 30 June 2016.
The directors of the company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of KalNorth Gold Mines Limited for the year ended 30 June 2016 complies
with section 300A of the Corporations Act 2001.
RSM AUSTRALIA PARTNERS
Perth, WA
Dated: 28 September 2016
ALASDAIR WHYTE
Partner
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Corporate Governance
The Board of Directors of KalNorth Gold Mines Limited is responsible for the corporate governance of the
Company. The Board guides and monitors the business and affairs of KalNorth Gold Mines Limited on behalf
of the shareholders by whom they are elected and to whom they are accountable. The Company’s
governance approach aims to achieve exploration, development and financial success while meeting
stakeholders’ expectations of sound corporate governance practices by proactively determining and adopting
the most appropriate corporate governance arrangements.
ASX Listing Rule 4.10.3 requires listed companies to disclose in their Annual Report the extent to which they
have complied with the ASX Best Practice Recommendations of the ASX Corporate Governance Council
(“CGC”) in the reporting period. A description of the Company’s main corporate governance practices is set
out below. The Corporate Governance Statement is current as at 30 June 2016, and has been approved by
the Board of Directors. All these practices, unless otherwise stated, were in place for the entire year. They
comply with the ASX Corporate Governance Principles and Recommendations (3rd edition).
The Company's directors are fully cognisant of the Corporate Governance Principles and Recommendations
published by CGC and have adopted those recommendations where they are appropriate to the Company's
circumstances. However, a number of those principles and recommendations are directed towards listed
companies considerably larger than KalNorth Gold Mines Limited, whose circumstances and requirements
accordingly differ markedly from the Company's. For example, the nature of the Company's operations and
the size of its staff mean that a number of the board committees and other governance structures
recommended by the CGC are not only unnecessary in the Company's case, but the effort and expense
required to establish and maintain them would, in the directors' view, be an unjustified diversion of
shareholders' funds.
As the Company's activities develop in size, nature and scope, the size of the Board and the implementation
of additional corporate governance structures will be given further consideration.
The Company’s website at www.kalnorthgoldmines.com contains a corporate governance section that
includes copies of the Company’s corporate governance policies.
Principle 1: Lay solid foundations for management and oversight
Recommendation 1.1:
Companies should disclose the respective roles and responsibilities of its board and management and those matters
expressly reserved to the Board and those delegated to management and disclose those functions.
The Board’s role is to govern the Company rather than to manage it. In governing the Company, the Directors
must act in the best interests of the Company as a whole. It is the role of the senior management to manage
the Company in accordance with the direction and delegations of the Board and the responsibility of the
Board to oversee the activities of management in carrying out these delegated duties.
The Board is responsible for:
• overseeing the Company’s commitment to the health and safety of employees and contractors, the
environment and sustainable development;
• overseeing the activities of the Company, including its control and accountability systems;
• appointing and removing the Managing Director, Company Secretary, and other senior executives,
evaluating their performance, reviewing their remuneration and ensuring an appropriate succession
plan;
setting the strategic objectives of the Company and monitoring its progress against those objectives;
reviewing, ratifying and monitoring systems of risk management and internal control;
setting the operational and financial objectives and goals for the Company;
•
•
•
• ensuring that there are effective corporate governance policies and practices in place
• approving and monitoring budgets, capital management and acquisitions and divestments;
• approving and monitoring all financial reporting to the market;
• appointing external auditors and principal professional advisors; and
• making formal determinations required by the Company’s constitutional documents or by law or other
external regulation.
The Managing Director (MD) is normally responsible for running the affairs of the Company under delegated
authority from the Board and to implement the policies and strategy set by the Board. In carrying out those
49
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
responsibilities, the Managing Director must report to the Board in a timely manner and ensure all reports to
the Board present a true and fair view of the Company’s financial condition and operational results. Given the
present size and scale of operations, the Company does not have a Managing Director but rather an
Executive Director supported by a small management team. Consequently, the Board as a whole takes a
closer interest in the day to day affairs of the Company.
Recommendation 1.2:
Companies should undertake appropriate checks before appointing a person, or putting forward to security holders a
candidate for election, as a director and provide security holders with all material information in its possession relevant to
a decision on whether or not to elect or re-elect a director.
The Company undertakes checks on any person who is being considered as a director. These checks may
include character, experience, education and financial history and background.
All security holder releases will contain material information about any candidate to enable an informed
decision to be made on whether or not to elect or re-elect a director.
Recommendation 1.3:
Companies should have a written agreement with each director and senior executive setting out the terms of their
appointment.
All directors have in place a formal letter of appointment including a director’s interest agreement with respect
to disclosure of security interests.
Recommendation 1.4:
The Company Secretary should be accountable directly to the Board, through the chair, on all matters to do with the
proper functioning of the Board.
The Company Secretary has a direct reporting line to the Board, through the Chair. In view of the Company’s
size and activity level, the Executive Director is also the Company Secretary.
Recommendation 1.5:
The Company should establish a policy concerning diversity and disclose the policy or summary of the policy. The policy
should include requirements for the Board to establish measurable objectives for achieving gender diversity and for the
Board to assess annually both the objectives and progress in achieving them.
The Company recognises that a talented and diverse workforce is a key competitive advantage. The
Company is committed to developing a workplace that promotes diversity. The Company’s policy is to recruit
and manage on the basis of competence and performance regardless of age, nationality, race, gender,
religious beliefs, sexuality, physical ability or cultural background. The Company has not yet formalised this
policy into a written document. It is the Board’s intention to formalise the policy at a time when the size of the
Company and its activities warrants such a structure.
The Company has 6 staff (comprising the three directors and one project geologist, one female part-time
bookkeeper and one female exploration technical assistant), - There are no women in senior executive
positions or on the Board.
Recommendation 1.6:
The Company should have and disclose a process for periodically evaluating the performance of the Board, its
committees and individual directors and whether a performance evaluation was undertaken in the reporting period in
accordance with that process.
Due to the size of the Board and the nature of its business, it has not been deemed necessary to institute a
formal documented performance review program of individuals. The Chairman conducted an informal review
during the financial year whereby the performance of the Board as a whole and the individual contributions of
each director were discussed. The Board considers that at this stage of the Company’s development an
informal process is appropriate.
50
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Recommendation 1.7:
The Company should have and disclose a process for periodically evaluating the performance of senior executives and
whether a performance evaluation was undertaken in the reporting period in accordance with that process.
The Board undertakes a review of the senior executives’ performance annually, including setting the goals for
the coming year and reviewing the achievement of these goals.
Performance has been measured to date by the efficiency and effectiveness of the enhancement of the
Company’s mineral interest portfolio, the designing and implementation of the exploration and development
programme and the securing of ongoing funding so as to continue its exploration and development activities.
This performance evaluation is not based on specific financial indicators such as earnings or dividends as the
Company is at the exploration stage and during this period is expected to incur operating losses.
Due to the size of the Company and the nature of its business, it has not been deemed necessary to institute
a formal documented performance review program of senior executives. The Non-executive directors
conducted an informal review process whereby they discussed with the Executive Director the approach
toward meeting the short and long term objectives of the Company. The Board considers that at this stage of
the Company’s development an informal process is appropriate.
Principle 2: Structure the board to add value
Recommendation 2.1:
The Board should establish a Nomination Committee comprising a majority of independent directors (including the Chair).
The Company established a nomination committee comprising the two non-executive directors, including the
Chairman but no separate meetings of this committee were held in the reporting year. The Board considers
that the Company is not currently of a size, nor are its affairs of such complexity, to justify separate committee
meetings at this time. The Board as a whole is able to address the governance aspects of the full scope of
the Company’s activities and to ensure that it adheres to appropriate ethical standards. In particular, the full
Board considers those matters that would usually be the responsibility of a nomination committee. However,
the Board considers that no efficiencies or other benefits would be gained by having separate nomination
committee meetings.
Directors are appointed under the terms of the Company’s constitution. Appointments to the Board are based
upon merit and against criteria that serves to maintain an appropriate balance of skills, expertise, and
experience of the board. The categories considered necessary for this purpose are a blend of accounting and
finance, business, technical and administration skills. Casual appointments must stand for election at the
next annual general meeting of the Company.
Retirement and rotation of Directors are governed by the Corporations Act 2001 and the Constitution of the
Company. All Directors, with the exception of the Managing Director (if appointed), serve for a period of three
years before they are requested to retire and if eligible offer themselves for re-election.
Recommendation 2.2:
The Company should have and disclose a Board skills matrix setting out the mix of skills and diversity that the Board
currently has or is looking to achieve in its membership.
The Company has a skills or diversity matrix in relation to its Board members which reflects the current size
and scope of the Company’s operations. The Board will adopt a more detailed and comprehensive matrix if
and when there is a significant change in the size and scale of its activities.
Director
Gender
Jiajun Hu
(Chairman)
Male
Lijun Yang
Male
Yuanguang
Yang
Male
Skills/Qualifications
Experience Based on Skills/Knowledge
Accounting/
Finance
Communications/
Investor Relations
Corporate
Management
Fund
Raising
Geology
Finance and
accounting
BSc in Business
Geologist
MSc in Geology
MAIG;MSEG
Accounting
CPA
√
√
√
√
√
51
√
√
√
√
√
√
√
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Recommendation 2.3:
The Company should disclose the names of the directors considered to be independent directors and length of service of
each director.
The names, position, appointment date and independence classification are set out in the table below:
Director
Position
Date Appointed
Independent
Jiajun Hu (Chairman)
Non-executive
Chairman
13 December 2013 (appointed as
Chairman on 14 April 2015)
Lijun Yang
Executive Director
8 November 2013
Yuanguang Yang
Non-executive
Director
28 August 2014
No
No
No
Recommendation 2.4:
A majority of the Board of the Company should be independent directors.
In assessing whether a director is classified as independent, the Board considers the independence criteria
set out in the ASX Corporate Governance Council Recommendation 2.1 and other facts, information and
circumstances deemed by the Board to be relevant. Using the ASX Best Practice Recommendations on the
assessment of the independence of Directors, the Board considers that at present none of the Directors can
be considered independent. Mr Jiajun Hu and Mr Yuanguang Yang have been nominated to the Board by
major shareholders of the Company, whilst Mr Lijun Yang is an executive director.
The Company considers that each of the directors possesses the skills and experience suitable for building
the Company. Although the Company does not currently have a majority of independent directors, the current
composition of the Board is considered appropriate in the circumstances.
It is the Board’s intention to review its composition on a continual basis and in line with any future changes to
Company’s size and level of activities.
Recommendation 2.5:
The Chair of the Board should be an independent director, and should not be the CEO of the Company.
The Chair of the Board, Mr Jiajun Hu is not the CEO of the Company and he has a non-executive role. For
the reasons explained in the preceding section, Mr Hu is not an independent director.
Given the size of the Company and the complexity of its affairs as well as the Board’s desire to maximise
exploration expenditure within the constraints of the Company’s overall working capital, the Company is not
presently in a position to have a majority of independent directors.
Recommendation 2.6:
The Company should have a program for inducting new directors and provide appropriate professional development
opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors
effectively.
The Company does not currently have a formal induction program for new Directors nor does it have a formal
professional development program for existing Directors. The Board does not consider that a formal induction
program is necessary given the current size and scope of the Company’s operations.
The Board seeks to ensure that all of its members understand the Company’s operations. Directors also
attend, on behalf of the Company and otherwise, technical and commercial seminars and industry
conferences which enable them to maintain their understanding of industry matters and technical advances.
Noting the above, the Board considers that a formal induction program is not necessary given the current size
and scope of the Company’s operations, though the Board may adopt such a program in the future as the
Company’s operations grow and evolve.
52
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Principle 3: Act ethically and responsibly
Recommendation 3.1:
Companies should have a Code of Conduct for its directors, senior executives and employees.
The Company has established a Code of Conduct which sets out the Company’s key values and how they
should be applied within the workplace and in dealings with those outside the Company. A copy of the Code
is available on the Company’s website.
Principle 4: Safeguard Integrity in Financial Reporting
Recommendation 4.1
The Board should have an Audit Committee.
The Board established an audit committee comprising the two non-executive directors of the Company but no
separate committee meetings were held during the reporting year. The Board considers that the Company is
not currently of a size, nor are its affairs of such complexity, to justify separate committee meetings at this
time. The Board as a whole is able to address the governance aspects of the full scope of the Company’s
activities and to ensure that it adheres to appropriate ethical standards. In particular, the full Board considers
those matters that would usually be the responsibility of an audit committee. However, the Board considers
that no efficiencies or other benefits would be gained by holding separate audit committee meetings.
The Company requires external auditors to demonstrate quality and independence. The performance of the
external auditor is reviewed and applications for tender of external audit services are requested as deemed
appropriate, taking into consideration assessment of performance, existing value and tender costs.
The external audit firm partner or an appropriate delegate responsible for the Company audit attends
meetings of the Board by invitation.
Recommendation 4.2
The Board of the Company should, before it approves the Company’s financial statements for a financial period, receive
from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained
and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the
financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of
risk management and internal control which is operating effectively.
The Company has in place a procedure whereby prior to approval of financial statements by the Board (in
addition to any formal management representation letter to the Company’s auditor) a declaration is provided
in accordance with Sections 286 and 295(3)(b) of the Corporations Act 2001 (Cth) that financial records have
been properly maintained, the financial statements comply with the accounting standards, and give a true and
fair view of the financial position based on sound risk management and internal controls operating effectively.
This declaration was provided by the Executive Director, Mr Lijun Yang who has been nominated by the
Board to provide oversight and supervision of the Company’s financial affairs.
Recommendation 4.3
The Company should ensure that the external auditor is present at the AGM and be available to answer questions from
security holders relevant to the audit.
The Company invites the auditor or representative of the auditor to the AGM in accordance of the
requirements of Section 250RA of the Corporations Act 2001 (Cth) and is available to answer questions
relevant to the audit.
53
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Principle 5 – Make timely and balanced disclosure
Recommendation 5.1:
Companies should have a written policy for complying with its continuous disclosure obligations under the Listing Rules.
The Company has developed an ASX Listing Rules Disclosure Strategy which has been endorsed by the
Board. The ASX Listing Rules Disclosure Strategy ensures compliance with ASX Listing Rules and
Corporations Act obligations to keep the market fully informed of information which may have a material effect
on the price or value of its securities and outlines accountability at both the Board and (where and when
applicable) senior executive level for that compliance. All ASX announcements are posted to the Company’s
website as soon as possible after confirmation of receipt is received from ASX.
A copy of the continuous disclosure policy is available on the Company’s website.
Principle 6 – Respect the rights of security holders
Recommendation 6.1 and 6.2:
Companies should provide information about itself and its governance to investors via its website.
Companies should design and implement an investor relations program to facilitate two-way communication with
investors.
The Company is committed to maintaining a Company website with general information about the Company
and its operations, information about governance and information specifically targeted at keeping the
Company’s shareholders informed about all major developments affecting the Company’s state of affairs.
The Company has a Shareholder Communication Policy which is available on the Company’s website.
Through this the Board aims to ensure that the shareholders are informed of the Company’s governance and
all major developments affecting the Company’s state of affairs. Information is communicated to shareholders
through the:
• Company website;
• ASX Company Announcements platform;
• Quarterly Operational and Cash flow reports;
• Half-year Financial Report;
• Annual Report;
•
Investor Presentations
• Shareholder meetings
• Other correspondence from time to time regarding matters impacting on shareholders.
Recommendations 6.3 and 6.4:
Companies should disclose the policies and processes in place to facilitate and encourage participation at meetings of
security holders.
Companies should give security holders the option to receive communications from, and send communications to, the
entity and its security registry electronically.
In accordance with the Company’s Shareholder Communications Policy, the Company supports shareholder
participation in general meetings and seeks to provide appropriate mechanisms for such participation. The
Company will use general meetings as a tool to effectively communicate with shareholders and allow
shareholders a reasonable opportunity to ask questions of the Board of Directors and to otherwise participate
in the meeting.
Mechanisms for encouraging and facilitating shareholder participation will be reviewed regularly to encourage
the highest level of shareholder participation.
54
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
The Company considers that communicating with shareholders by electronic means is an efficient way to
distribute information in a timely and convenient manner. In accordance with the Shareholder Communication
Policy, the Company has, as a matter of Practice, provided new shareholders with the option to receive
communications from the Company electronically and the Company encourages them to do so. Existing
shareholders are also encouraged to request communications electronically. All shareholders that have opted
to receive communications electronically are provided with notifications by the Company when an
announcement or other communication (including annual reports, notices of meeting etc) is uploaded to the
ASX announcements platform.
Principle 7 – Recognise and manage risk
Recommendation 7.1:
The Board should have a committee or committees to oversee risk.
The Board established a risk management committee comprising and the two non-executive directors of the
Company but no separate committee meetings were held in the reporting year. The role of the risk
management committee is therefore undertaken by the full Board. The Board considers that, given the
current size and scope of the Company’s operations, efficiencies or other benefits would not be gained by
having separate risk management committee meetings at present.
As the Company’s operations grow and evolve, the Board will reconsider the appropriateness of having
separate risk management committee meetings. However, the Board has adopted a Risk Management Policy
that sets out a framework for a system of risk management and internal compliance and control, and this is
available on the Company’s website.
Recommendation 7.2:
The Board should review the entity’s risk management framework at least annually to satisfy itself that it continues to be
sound and disclose whether such a review has taken place.
As the Board has responsibility for the monitoring of risk management it has not required a formal report
regarding the material risks and whether those risks are managed effectively. The Board believes that the
Consolidated Group is currently effectively communicating its significant and material risks to the Board and
its affairs are not of sufficient complexity to justify the implementation of a more formal system for identifying,
assessing, monitoring and managing risk in the Company.
Recommendation 7.3:
The Company should disclose if it has an internal audit function.
The Company does not have an internal audit function. The Board considers that the Company is not
currently of a size, nor are its affairs of such complexity, to justify the formation of an internal audit function at
this time. The Board as a whole continually evaluates and improves the effectiveness of its risk management
and internal control processes.
Recommendation 7.4:
The Company should disclose whether it has any material exposure to economic, environmental and social sustainability
risks and, if it does, how it manages or intends to manage those risks.
The Company is of the view that it has adequately disclosed the nature of its operations and relevant
information on exposure to economic, environmental and social sustainability risks. Other than general risks
associated with the mineral exploration industry, the Company does not currently have material exposure to
environmental and social sustainability risks.
55
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Principle 8 – Remunerate fairly and responsibly
Recommendation 8.1:
The Board should have a Remuneration Committee.
The Board has established a remuneration committee comprising the two non-executive directors of the
Company but no separately remuneration committee meetings were held in the reporting year. The Board
considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the
separate committee meetings at this time. The Board as a whole is able to address the governance aspects
of the full scope of the Company’s activities and to ensure that it adheres to appropriate ethical standards. In
particular, the full Board considers those matters that would usually be the responsibility of a remuneration
committee. However, the Board considers that no efficiencies or other benefits would be gained by having
separate remuneration committee meetings at this stage.
Recommendation 8.2:
Companies should separately disclose its policies and practices regarding the remuneration of non-executive directors
and the remuneration of executive directors and other senior executives.
The Company’s policies and practices regarding the remuneration of Executive and Non-Executive Directors
is set out in its Remuneration Policy which is available on the website.
This information is also set out in the Remuneration Report contained in the Company’s Annual Report for
each financial year
Recommendation 8.3:
A Company which has an equity based remuneration scheme should have a policy on whether participants are permitted
to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of
participating in the scheme and disclose that policy or summary of it.
The Company does not have an equity based remuneration scheme which is affected by this
recommendation. Recipients of equity-based remuneration (e.g. incentives options) are not permitted to enter
into any transactions that would limit the economic risk of options or other unvested entitlements.
56
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Annual Mineral Resources and Ore Reserves Statement
The Company’s reported Mineral Resources are located within three projects that lie in an arc 50-80kms’ to
the north east and south west of Kalgoorlie, Western Australia. The project area is to the north east of
Kalgoorlie and comprises the Lindsays, Kalpini and Kurnalpi project areas which are spread over a 60km arc
from west to east.
The most significant change in the 2016 Annual Mineral Resources and Ore Reserve Statement including
Removal of Stockpile ore within Lindsay’s project which was processed in 2016 FY, Removal of the mineral
resources contained within the Spargoville project as a result of that project’s divestment in May 2016 as well
as upgrading the resource of Brilliant within Kurnalpi project from JORC 2004 to JORC 2012.
The Lindsays project consists of a contiguous package of tenements centred around the Lindsays Mine site
which remains under suspension. The Lindsay’s mineral resources are contained within two granted Mining
Leases. As the gold price improved significantly since December 2015, the Company processed the stockpile
ore in early 2016. There has been no change to the mineral resource estimate of other deposits at Lindsays
during the year ended 30 June 2016.
The Kalpini Project resource is contained within a granted Mining Lease. There has been no change to the
mineral resource estimate at Kalpini during the year ended 30 June 2016.
The Kurnalpi project lies 85km to the east of Kalgoorlie straddling the Kurnalpi-Pinjin road and consists of a
contiguous package of Exploration, Prospecting and Mining leases. The project contains six individual
resources all located on granted Mining leases and centred within 3 kilometres of the more significant Brilliant
deposit. The resource of Brilliant was upgraded from JORC 2004 to JORC 2012 during 2016 financial year,
there has been no change to the mineral resource of other deposits at Kurnalpi during the year ended 30
June 2016.
57
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Annual Mineral Resources and Ore Reserves Statement
Table 1: Ore Resources
Summary of Mineral Resource Estimates (at 30 June 2016)
Reported according to JORC Category and Deposit (JORC 2004 & 2012 Compliant)
Deposit
Tonnes (t) Grade (g/t) Ounces (oz.)
Tonnes (t) Grade (g/t) Ounces (oz.)
Tonnes (t) Grade (g/t) Ounces (oz.)
Tonnes (t) Grade (g/t) Ounces (oz.)
Measured
Indicated
Inferred
Total
Discovery Hill
Halfway Hill
Scottish Lass
1
Brilliant
Sparkle
Dazzle
Total
Gambia/Camelia
Atlas
Total
Eastern Structure
1
Parrot Feathers
Central Structure
Neves Prospect
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,620,000
288,900
-
2,908,900
3,072,000
169,000
3,241,000
1,479,000
140,000
1,315,100
490,900
3,425,000
Kurnalpi
-
-
-
130,000
510,000
84,700
109,300
920,000
8,500
-
190,000
511,000
117,800
1,621,000
Kalpini
183,700
1,074,000
6,900
299,000
190,600
1,373,000
Lindsays
76,000
18,000
46,500
24,900
203,000
261,000
47,900
37,700
165,400
549,600
-
-
-
1.3
0.9
-
1.3
1.9
1.3
1.8
1.6
4.0
1.1
1.6
1.5
0.9
1.1
1.0
1
1.0
0.8
0.9
1.6
1.2
1.5
1.6
4.3
1.1
1.3
2.8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Measured
KalNorth Gold Mines Total
Indicated
Inferred
3,600
18,700
2,600
130,000
510,000
84,700
28,300
3,530,000
5,800
12,600
478,900
511,000
46,700
4,519,900
53,900
11,100
4,146,000
468,000
65,000
4,614,000
10,500
36,000
1,700
1,500
1,682,000
401,000
1,363,000
528,600
49,700
3,974,600
0.9
1.1
1.0
1.2
0.9
0.8
1.1
1.8
1.2
1.7
1.6
4.2
1.1
1.6
1.7
Total
3,600
18,700
2,600
137,600
14,300
12,600
164,500
237,600
18,000
255,600
86,500
54,000
48,200
26,400
215,100
Tonnes (t) Grade (g/t) Ounces (oz.)
Tonnes (t)
Grade (g/t) Ounces (oz.)
Tonnes (t) Grade (g/t) Ounces (oz.)
Tonnes (t)
Grade (g/t)
Ounces (oz.)
Total
9,574,900
1.5
473,800
3,543,600
1.4
161,400
13,108,500
1.5
635,200
1. Brilliant and Parrot Feathers reported under JORC 2012, all others under JORC 2004
58
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Annual Mineral Resources and Ore Reserves Statement
Governance and Internal Controls
The company ensures that all resource calculations are undertaken and or reviewed by independent industry
consultants.
All drill hole data was imported and stored into a master database managed by the company using Datashed
and SQL. Data validation and interrogation is performed by KalNorth and independent resource consultants
when required. Any errors in the data are communicated to the Exploration Manager and on approval
rectified. Amendments made to the format of a drill holes, survey data samples and assay information are
recorded in the database for future reference.
Quality control on resource drill programs have been undertaken to industry standards with implementation of
appropriate drilling technique, survey data collection, assay standards, sample duplicates and repeat
analysis. Samples were analysed by independent internationally accredited laboratories with a QAQC
program that reported monthly and showing acceptable levels of accuracy and precision. Regular inspections
of the assay laboratory were made during the course of drilling programs to ensure that the laboratory
maintained strong adherence to QAQC. The company interrogates and validates its internal assay standards
using Datashed QAQC software.
The mineral resource estimate for the Parrot Feathers of Lindsays project as well as Brilliant of Kurnalpi
project were undertaken independently by Ravensgate Mining Industry Consultants.
Except the Brilliant deposit, other mineral resource estimates for the Kurnalpi were undertaken independently
by Snowden Mining Industry Consultants.
Competent Person Statement
The Mineral Resources and Ore Reserves Statement is based on, and fairly represents information and
supporting documentation compiled by the person named below
The Mineral Resources and Ore Reserves statement as a whole has been approved by Mr Lijun Yang who is
the Executive Director and a full time employee and a holder of shares in KalNorth Gold Mines Limited and is
a member of The Australian Institute of Geoscientists (AIG). The details within the Mineral Resources and
Ore Reserve Statement are consistent with information previously released and prepared by previous
employees and consultants of the company and compiled by Mr Yang. Mr Yang has sufficient experience
which is relevant to the style of mineralisation and type of deposit under consideration and to the activity that
he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australian Code for
Reporting of exploration Results, Mineral Resources and Ore Reserves”. Mr Yang consents to the inclusion
in the report of the matters based on his information in the form and context in which it appears in this
announcement.
The information within this Annual Report that relates to Exploration results is based on information compiled
by Mr Lijun Yang who is the Executive Director and a full time employee of KalNorth Gold Mines Limited and
is a member of The Australian Institute of Geoscientists (AIG). Mr Yang has sufficient experience which is
relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is
undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australian Code for
Reporting of exploration Results, Mineral Resources and Ore Reserves”. Mr Yang consents to the inclusion
in the report of the matters based on his information in the form and context in which it appears in this
announcement.
59
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Mining Tenement
Mining Tenements held at 30 June 2016
Holder
All tenements are located in the Goldfields region of Western Australia.
Tenement
L27/0088
M27/0485
E28/1477
E28/2015
E28/2153
E28/2226
E28/2256
E28/2541
M28/0007
M28/0066
M28/0072
M28/0076
M28/0084
M28/0089
M28/0090
M28/0092
M28/0113
M28/0374
M28/0375
P28/1097
P28/1100
P28/1101
P28/1102
P28/1103
P28/1104
P28/1105
P28/1106
P28/1107
P28/1108
P28/1111
P28/1112
P28/1113
P28/1114
P28/1115
P28/1116
P28/1117
P28/1118
P28/1119
P28/1125
P28/1126
P28/1154
P28/1155
P28/1156
P28/1157
P28/1180
P28/1184
P28/1186
P28/1187
P28/1190
P28/1191
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
SHANNON RESOURCES PTY LTD
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
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KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
Status
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
60
Project
Kalpini
Kalpini
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Interest %
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Mining Tenement
LUSITAN PROSPECTING PTY LTD
P28/1226
LUSITAN PROSPECTING PTY LTD
P28/1227
LUSITAN PROSPECTING PTY LTD
P28/1228
LUSITAN PROSPECTING PTY LTD
P28/1229
LUSITAN PROSPECTING PTY LTD
P28/1230
LUSITAN PROSPECTING PTY LTD
P28/1231
SHANNON RESOURCES PTY LTD
P28/1254
SHANNON RESOURCES PTY LTD
P28/1255
SHANNON RESOURCES PTY LTD
M28/0377
SHANNON RESOURCES PTY LTD
M28/0378
SHANNON RESOURCES PTY LTD
M28/0379
SHANNON RESOURCES PTY LTD
M28/0380
SHANNON RESOURCES PTY LTD
M28/0381
SHANNON RESOURCES PTY LTD
M28/0382
SHANNON RESOURCES PTY LTD
M28/0383
SHANNON RESOURCES PTY LTD
M28/0384
SHANNON RESOURCES PTY LTD
P28/1282
KALNORTH GOLD MINES LIMITED
E27/0517
KALNORTH GOLD MINES LIMITED
L27/0082
KALNORTH GOLD MINES LIMITED
L27/0084
KALNORTH GOLD MINES LIMITED
M27/0034
KALNORTH GOLD MINES LIMITED
M27/0169
M27/0486
KALNORTH GOLD MINES LIMITED
M15/18061 KALNORTH GOLD MINES LIMITED
E27/0524
HERON RESOURCES LIMITED
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
PENDING
PENDING
PENDING
PENDING
PENDING
PENDING
PENDING
PENDING
PENDING
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Lindsays Find
Lindsays Find
Lindsays Find
Lindsays Find
Lindsays Find
Lindsays Find
Spargoville
Kalpini
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100% Au rights
¹The Spargoville tenement was divested and in transferring.
61
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Shareholder Information
Shareholder Information
The shareholder information set out below was applicable as at 18 October 2016.
A.
Distribution of Equity Securities
Analysis of number of equity holders by size of holding:
Spread of
Holdings
Number of
Holders
Number of
Units
% of Total
Issued Capital
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
126
185
150
340
131
932
46,509
596,655
1,233,282
11,988,133
880,375,481
894,240,060
0.005%
0.067%
0.138%
1.341%
98.450%
100%
The number of shareholders holding less than a marketable parcel is 666.
B.
Voting Rights
At a general meeting of shareholders:
a. On a show of hands, each person who is a member or sole proxy has one vote.
b. On a poll, each shareholder is entitled to one vote for each fully paid share.
C.
Equity Security Holders
The names of the twenty largest quoted equity security holders are listed below:
Rank Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
SOUTH VICTORY GLOBAL LIMITED
RENEERGY PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
GOLD FRESH LIMITED
SMARTER GROUP (AUSTRALIA) PTY LTD
FINANCIAL MARKET INFRASTRUCTURE FUND PTY LTD
LINKS GROUP
BOND STREET CUSTODIANS LIMITED
MR JOHN MCKINSTRY
DAHT INTERNALTIONAL TRADING PTY LTD
ZAC-ZOOM PTY LTD
PERSHING AUSTRALIA NOMINEES PTY LTD
INTERNATIONAL TECHNOLOGY GROUP PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
MR JUSTIN JOHN WOOD & MRS CAROLYN WOOD
CITICORP NOMINEES PTY LIMITED
EDWIN PAUL CAYZER & LORAINE HELEN CAYZER
MR GREGORY GERARD RYAN
STEVEN WILLIS SHALL CRASS
MR BEVAN ALFRED JAGGARD GROUP
Total Units
260,688,116
188,594,646
109,822,914
86,615,562
65,490,400
49,026,086
33,470,170
14,619,679
6,013,055
5,000,000
5,000,000
4,257,096
3,398,012
2,793,179
2,316,839
2,040,196
1,860,000
1,800,000
1,710,000
1,6838,100
Issued
Capital
%
29.15
21.09
12.28
9.69
7.32
5.48
3.74
1.64
0.67
0.56
0.56
0.48
0.38
0.31
0.26
0.23
0.21
0.20
0.19
0.19
Totals
846,199,050
94.63
62
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2016
Shareholder Information
D.
Substantial Shareholders
Substantial shareholders (>5% of shares held) in the Company are listed below:
Rank
Shareholder
SOUTH VICTORY GLOBAL LIMITED
RENEERGY PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
GOLD FRESH LIMITED
SMARTER GROUP (AUSTRALIA) PTY LTD
1
2
3
4
5
6
Total Units
260,688,116
188,594,646
109,822,914
86,615,562
65,490,400
FINANCIAL MARKET INFRASTRUCTURE FUND PTY LTD
49,026,086
TOTAL
760,237,724
63